GT GLOBAL FLOATING RATE FUND INC, POS 8C, 1998-07-31

GT GLOBAL FLOATING RATE FUND INC
POS 8C, 1998-07-31

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998.

SECURITIES ACT FILE NO. 333-37243
INVESTMENT COMPANY ACT FILE NO. 811-07957

POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT AS STATED BELOW
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

PRE-EFFECTIVE AMENDMENT NO. _

POST-EFFECTIVE AMENDMENT NO. 3 X

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

AMENDMENT NO. 6 X

(CHECK APPROPRIATE BOX OR BOXES)
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GT GLOBAL FLOATING RATE FUND, INC.

(D/B/A AIM FLOATING RATE FUND)

(Exact name of Registrant as specified in charter)

11 GREENWAY PLAZA, SUITE 100, HOUSTON, TX 77046

(Address of principal executive offices)

Registrant's Telephone Number, including Area Code: (713) 626-1919

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Copies to:

<TABLE>
<S> <C> <C>
ARTHUR J. BROWN, ESQ. SAMUEL D. SIRKO, ESQ. MICHAEL A. SILVER
R. CHARLES MILLER, ESQ. A I M ADVISORS, INC. INVESCO (NY), INC.
KIRKPATRICK & LOCKHART LLP 11 Greenway Plaza 50 California Street, 27th Floor
1800 Massachusetts Avenue, N.W. Suite 100 San Francisco, CA 94111
Washington, D.C. 20036 Houston, Texas 77046 (Name and address of agent for
(713) 626-1919 service)
</TABLE>

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Approximate date of proposed public offering: AS SOON AS PRACTICABLE AFTER THIS
REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
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CALCULATION OF REGISTRATION FEE

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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value).........
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(1) This registration statement is being filed for the purpose of updating
information herein and no additional shares are being registered hereby. The
amount of the registration fee does not include $ which has
previously been paid to the Commission for registration fees relating to
shares registered pursuant to Securities Act File No. 333-37243
and unissued as of , 1998.

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<PAGE> 2

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.

PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS IN THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO REGISTRATION
STATEMENT NO. 333-37243, AS AMENDED, PREVIOUSLY FILED BY THE REGISTRANT ON FORM
N-2. THIS REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 3
TO REGISTRATION STATEMENT NO. 333-37243, AND SUCH POST-EFFECTIVE AMENDMENT SHALL
HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS
REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES
ACT. THE REGISTRATION STATEMENT AND THE REGISTRATION STATEMENT AMENDED HEREBY
ARE COLLECTIVELY REFERRED TO HEREUNDER AS THE "REGISTRATION STATEMENT."

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AIM FLOATING RATE FUND

FORM N-2 CROSS REFERENCE SHEET

PART A

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION PROSPECTUS CAPTION
- ------ ------- ------------------
<C> <S> <C>
1 Outside Front Cover................ Outside Front Cover of Prospectus
2 Inside Front and Outside Back Cover
Page............................. Inside Front and Outside Back Cover Page of
Prospectus
3 Fee Table and Synopsis............. Summary; Table of Fees and Expenses
4 Financial Highlights............... Financial Highlights
5 Plan of Distribution............... Outside Front Cover; Summary; Purchase of Shares;
Description of Capital Stock
6 Selling Shareholders............... Not Applicable
7 Use of Proceeds.................... Use of Proceeds; Investment Objective and Policies
8 General Description of
Registrant....................... Summary; Organization of the Fund; Investment
Objective and Policies; Investment Restrictions;
Special Considerations and Risk Factors;
Description of Capital Stock
9 Management......................... Management; Description of Capital Stock; Custodian,
Transfer and Dividend Disbursing Agent and Registrar
10 Capital Stock, Long-Term Debt and
Other Securities................. Dividends and Other Distributions; Dividend
Reinvestment Plan; Taxes; Description of Capital
Stock
11 Defaults and Arrears on Senior
Securities....................... Not Applicable
12 Legal Proceedings.................. Not Applicable
13 Table of Contents of the Statement
of Additional Information........ Not Applicable
</TABLE>

PART B

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION
- ------ -------
<C> <S> <C>
14 Cover Page......................... Not Applicable
15 Table of Contents.................. Not Applicable
16 General Information and History.... Not Applicable
17 Investment Objective and
Policies......................... Investment Objective and Policies; Investment
Restrictions; Portfolio Transactions
18 Management......................... Management
19 Control Persons and Principal
Holders of Securities............ Description of Capital Stock
20 Investment Advisory and Other
Services......................... Management; Custodian, Transfer and Dividend
Disbursing Agent and Registrar
21 Brokerage Allocation and Other
Practices........................ Portfolio Transactions
22 Tax Status......................... Taxes
23 Financial Statements............... Not Applicable
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE> 4

[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--

AIM FLOATING RATE FUND

Common Stock

PROSPECTUS

SEPTEMBER 8, 1998

This Prospectus contains information about AIM FLOATING RATE FUND (the "Fund"),
a continuously offered, non-diversified, closed-end management investment
company. The Fund invests all of its investable assets in Floating Rate
Portfolio (the "Portfolio"), a separate, non-diversified, closed-end management
investment company that has the same investment objective as the Fund. The
investment objective of the Fund and the Portfolio is to provide as high a level
of current income and preservation of capital as is consistent with investment
in senior secured corporate loans ("Corporate Loans") and senior secured debt
securities ("Corporate Debt Securities") that meet credit standards established
by its investment manager, A I M Advisors, Inc. ("AIM") and its sub-advisor,
INVESCO Senior Secured Management, Inc. (the "Sub-advisor"). The Portfolio's
investments primarily take the form of assignments of, or participations in,
Corporate Loans made by banks and other financial institutions and Corporate
Debt Securities. It is anticipated that the Corporate Loans and Corporate Debt
Securities will pay interest at rates that float or reset at a margin above a
generally recognized base lending rate such as the London InterBank Offered Rate
("LIBOR") or the prime rate of a designated U.S. bank. There is no assurance
that the investment objective of the Fund will be achieved.

Shares of Common Stock of the Fund are continuously offered at a price equal to
the next determined net asset value per share without a front-end sales charge.
The minimum initial purchase is $500, and the minimum subsequent purchase is
$100.

No market presently exists for the Fund's Common Stock and it is not currently
expected that a secondary market will develop. Since the Fund's Common Stock may
not be considered readily marketable, the Board of Directors of the Fund
currently intends to consider making tender offers on a quarterly basis to
repurchase all or a portion of the Common Stock of the Fund from stockholders at
the net asset value per share. See "Tender Offers." Shares of Common Stock that
have been held for less than four years and that are repurchased by the Fund
pursuant to tender offers will be subject to an "Early Withdrawal Charge" that
will not exceed 3.0% of the original purchase amount for such Common Stock. See
"Early Withdrawal Charge."

The Common Stock of the Fund involves investment risks, including fluctuations
in value and the possible loss of some or all of the principal investment. The
Portfolio may invest all or substantially all of its assets in Corporate Loans,
Corporate Debt Securities or other securities that are rated below investment
grade by a nationally recognized statistical rating organization, or in
comparable unrated securities. The Fund is authorized to borrow money to finance
tender offers, for temporary, extraordinary or emergency purposes, or, while it
has no current intention of doing so, for the purpose of financing additional
investments. Such leverage creates certain risks for holders of Common Stock,
including the risk of higher volatility of the net asset value of the Common
Stock. See "Special Considerations and Risk Factors -- Effects of Leverage."

This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. Additional information concerning the Fund may be
obtained by writing to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173 or by calling 1-800-347-4246. Additional information about the Fund
may also be obtained from http://www.aimfunds.com.

THE FUND'S COMMON STOCK IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUND'S COMMON STOCK IS NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY................................ 2
THE FUND............................... 6
Table of Fees and Expenses........... 6
Financial Highlights................. 7
Use of Proceeds...................... 7
Investment Objective and Policies.... 7
Investment Restrictions.............. 14
Special Considerations and Risk
Factors........................... 15
Purchase of Shares................... 18
Tender Offers........................ 18
Early Withdrawal Charge.............. 20
Management........................... 20
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Directors and Executive Officers..... 22
Portfolio Transactions............... 23
Dividends and Other Distributions.... 24
Taxes................................ 24
Dividend Reinvestment Plan........... 27
Automatic Investment Plan............ 27
Exchange Privilege................... 28
Determination of Net Asset Value..... 28
Description of Capital Stock......... 29
Yield Information.................... 30
OTHER INFORMATION...................... 30
APPENDIX A............................. A-1
</TABLE>

SUMMARY

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THE FUND. AIM Floating Rate Fund (the "Fund") is a continuously offered,
non-diversified, closed-end management investment company. See "The Fund."

THE PORTFOLIO. Floating Rate Portfolio (the "Portfolio") is a non-diversified,
closed-end management investment company. See "Special Considerations and Risk
Factors -- Fund/Portfolio Investment Structure."

THE OFFERING. The Fund offers its Common Stock at a price equal to the next
determined net asset value per share without a front-end sales charge. The
minimum initial purchase is $500, and the minimum subsequent purchase is $100,
except that with respect to certain retirement accounts, the minimum initial
purchase is $250. The Fund reserves the right to waive or modify the initial and
subsequent minimum investment requirements at any time.

The Fund currently intends to offer only shares of Common Stock. Although the
Fund has no present intention to do so, it may in the future offer shares of
preferred stock, subject to the requirements of the Investment Company Act of
1940, as amended (the "1940 Act").

INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund and
the Portfolio is to provide as high a level of current income and preservation
of capital as is consistent with investment in senior secured corporate loans
("Corporate Loans") and senior secured debt securities ("Corporate Debt
Securities") that meet credit standards established by the Portfolio's
investment manager, A I M Advisors, Inc. ("AIM") and its sub-advisor, INVESCO
Senior Secured Management, Inc. (the "Sub-advisor").

The Fund invests all of its investable assets in the Portfolio. Under normal
market conditions, the Portfolio in turn invests primarily in Corporate Loans
and Corporate Debt Securities made to or issued by U.S. or non-U.S. companies
("Borrowers"), including those that: (i) have variable rates which adjust to a
base rate, such as the London InterBank Offered Rate ("LIBOR") on set dates,
typically every 30 days but not to exceed one year; and/or (ii) have interest
rates that float at a margin above a generally recognized base lending rate such
as the prime rate ("Prime Rate") of a designated U.S. bank.

Except during periods pending investment of the net proceeds of the public
offering of the Fund's securities and during temporary defensive periods when,
in the opinion of the Sub-advisor, suitable Corporate Loans and Corporate Debt
Securities are not available for investment by the Portfolio or prevailing
market or economic conditions warrant, the Portfolio invests at least 80% of its
total assets in Corporate Loans and Corporate Debt Securities. Under normal
conditions, the Portfolio may invest up to 20% of its total assets in (i) senior
floating rate loans made and notes issued on an unsecured basis to Borrowers
that meet the credit standards established by AIM and the Sub-advisor
("Unsecured Corporate Loans and Unsecured Corporate Debt Securities"), (ii)
secured or unsecured short-term debt obligations rated within the four highest
rating categories assigned by a nationally recognized statistical rating
organization ("NRSRO"), or determined to be of comparable quality by the
Sub-advisor, (iii) fixed rate obligations of U.S. or non-U.S. companies that
meet the credit standards established by AIM and the Sub-advisor and that the
Portfolio expects to swap to a floating rate structure, or (iv) cash or cash
equivalents. Obligations rated in the fourth highest rating category assigned by
a NRSRO or determined to be of comparable quality by the Sub-advisor, may
include obligations considered to have certain speculative characteristics.

2
<PAGE> 6

cannot be predicted with accuracy. However, it is anticipated that the
Portfolio's Corporate Loans and Corporate Debt Securities will have an expected
average life of three to five years.

In general, the net asset value of the shares of an investment company that
invests primarily in fixed-income securities changes as the general level of
interest rates fluctuates. The Sub-advisor expects the Fund's net asset value to
be relatively stable during normal market conditions because the Portfolio will
consist primarily of floating and variable rate Corporate Loans and Corporate
Debt Securities and to a lesser extent short-term instruments. For this reason,
the Sub-advisor expects the value of the Portfolio to fluctuate less as a result
of interest rate changes than would a portfolio of fixed-rate obligations.
However, because the Portfolio's policy is to invest primarily in floating and
variable rate obligations and variable interest rates only reset periodically,
and because the prevailing spreads between LIBOR, the Prime Rate and other
market rates at which Borrowers may borrow are constantly changing, the
Portfolio's, and thus the Fund's, net asset value may fluctuate from time to
time in the event of an imperfect correlation between the interest rates on
variable rate loans held by the Portfolio and prevailing interest rates. Also,
defaults on Corporate Loans and Corporate Debt Securities could cause a decline
in the Portfolio's and the Fund's net asset value. The Fund's net asset value
also may be affected by changes in the creditworthiness of Borrowers, and, in
the case of Corporate Loans, in the creditworthiness of Lenders or Participants
interposed between the Portfolio and the Borrowers. In the event such
institutions were to default on their obligations, the Portfolio might
experience a reduction of both income and the value of its assets.

The Portfolio invests in a Corporate Loan or Corporate Debt Security only if,
in the Sub-advisor's judgment, the Borrower can meet debt service on such
Corporate Loan or Corporate Debt Security. The Sub-advisor performs its own
credit analysis of the Borrower. The Portfolio invests only in Unsecured
Corporate Loans and Unsecured Corporate Debt Securities made to Borrowers that
meet the credit standards established by the Sub-advisor for Corporate Loans and
Corporate Debt Securities.

A Corporate Loan in which the Portfolio may invest typically is negotiated and
structured by a syndicate of lenders ("Lenders") consisting of commercial banks,
thrift institutions, insurance companies, finance companies or other financial
institutions, one or more of which administers the Loan on behalf of all the
Lenders (the "Agent Bank"). The investment of the Portfolio in a Corporate Loan
may take the form of participation interests in a Corporate Loan ("Participation
Interests") or assignments of a Corporate Loan ("Assignments"). Participation
Interests may be acquired from a Lender or other holders of Participation
Interests ("Participants"). If the Portfolio purchases an Assignment from a
Lender, the Portfolio will generally become a "Lender" for purposes of the
relevant loan agreement, with direct contractual rights thereunder and under any
related collateral security documents in favor of the Lenders. On the other
hand, if the Portfolio purchases a Participation Interest either from a Lender
or a Participant, the Portfolio will not have established any direct contractual
relationship with the Borrower. The Portfolio would be required to rely on the
Lender or the Participant that sold the Participation Interest not only for the
enforcement of the Portfolio's rights against the Borrower but also for the
receipt and processing of payments due to the Portfolio under the Corporate
Loans. The Portfolio is thus subject to the credit risk of both the Borrower and
a Lender or Participant who sold the Participation Interest. The Portfolio will
invest in Loans through the purchase of Participation Interests only if at the
time of investment, the outstanding debt obligations of the Agent Bank and any
Lenders and Participants interposed between the Portfolio and a Borrower are
investment grade; i.e., rated BBB, A-3 or higher by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), or Baa, P-3
or higher by Moody's Investors Service, Inc. ("Moody's"), or, if unrated, deemed
by the Sub-advisor to be of equivalent quality. See "Investment Objective and
Policies."

Corporate Debt Securities typically are in the form of notes or bonds issued
in a public or private placement in the securities markets. Corporate Debt
Securities will typically have substantially similar terms to Corporate Loans,
but will not be in the form of Participations or Assignments.

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests primarily consist of direct obligations of a Borrower undertaken to
finance the growth of the Borrower's business internally or externally or to
finance a capital restructuring. A significant portion of such Corporate Loans
and Corporate Debt Securities may be issued in highly leveraged transactions
such as leveraged buy-out loans, leveraged recapitalization loans and other
types of acquisition financing. As noted above, the Portfolio may invest in
Corporate Loans and Corporate Debt Securities that are made to non-U.S.
Borrowers, provided that any such Borrower meets the credit standards
established by the Sub-advisor for U.S. Borrowers. The Portfolio similarly may
invest in loans to and securities issued by U.S. Borrowers with significant
non-dollar-denominated revenues, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars. In all
cases where the Corporate Loans or Corporate Debt Securities are not denominated
in U.S. dollars, provision will be made for payments to the Lenders, including
the Portfolio, in U.S. dollars pursuant to foreign currency swap arrangements.
See "Investment Objective and Policies." Loans to such non-U.S. Borrowers or
U.S. Borrowers may involve risks not typically involved in domestic investment,
including fluctuation in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or U.S. governmental laws or restrictions applicable to such loans.

LEVERAGE. Each of the Fund and the Portfolio may borrow money in amounts up to
33 1/3% of the value of its total assets to finance tender offers, for
temporary, extraordinary or emergency purposes, or for the purpose of financing
additional investments. See "Tender Offers." The Fund also may issue one or more
series of preferred shares, although it has no present intention to do so. The
Portfolio or Fund, as the case may be, may borrow to finance additional
investments or issue a class of preferred shares only when it believes that the
return that may be earned on investments purchased with the proceeds of such
borrowings or offerings will exceed the costs, including debt service and
dividend obligations, associated therewith. However, to the extent such costs
exceed the return

3
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on the additional investments, the return realized by the Fund's Common
Stockholders will be adversely affected. Leverage also creates other risks for
holders of Common Stock, including the risk of higher volatility of the net
asset value of the Common Stock.

Any issuance of preferred shares by the Fund or any bank borrowings by the
Fund or Portfolio are subject to and will comply with the requirements of the
1940 Act. Pursuant to the 1940 Act, among other things, the Fund may not issue
preferred shares unless immediately after their issuance the Fund is able to
maintain asset coverage of at least 200%. In the case of bank borrowings, asset
coverage of at least 300% must be maintained.

INVESTMENT MANAGERS. The Portfolio is managed by AIM and the Sub-Advisor. AIM
and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.

The Sub-advisor determines the investment composition of the Portfolio, places
all orders for the purchase and sale of securities and for other transactions,
and oversees the settlement of the Portfolio's securities and other
transactions. The Portfolio pays AIM monthly investment management and
administrative fees at the annual rate of 0.95% of the Portfolio's average net
assets, and AIM pays the Sub-advisor monthly investment sub-advisory and
sub-administrative fees at the annual rate of 0.48% of the Portfolio's average
net assets. See "Management."

The Sub-advisor has appointed INVESCO (NY), Inc. ("INVESCO (NY)") as the
investment sub-sub-advisor with respect to certain of the assets of the
Portfolio. The Sub-advisor pays INVESCO (NY) monthly investment sub-sub-advisory
and sub-sub-administrative fees at the annual rate of 0.48% of the Portfolio's
average assets delegated to it for sub-sub-advisory services. See "Management."

ADMINISTRATOR. AIM provides administrative services to the Fund and the
Portfolio. These include, among other things, furnishing officers and office
space, preparing or assisting in preparing materials for stockholders and
regulatory bodies and overseeing the provision of accounting services. The Fund
pays administration fees at the annual rate of 0.25% of the Fund's average net
assets. AIM has appointed INVESCO (NY) as the Fund's sub-administrator.

DISTRIBUTIONS. The Fund distributes substantially all of its net investment
income to holders of Common Stock by declaring dividends daily and paying them
monthly. Substantially all net capital gains, if any, are distributed at least
annually to holders of Common Stock. See "Dividends and Other Distributions."
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), each stockholder
will be deemed to have elected, unless the stockholder instructs otherwise in
writing, to have all dividends and other distributions, net of any applicable
withholding taxes, automatically reinvested in additional shares of Common
Stock. See "Dividend Reinvestment Plan."

TENDER OFFERS. The Fund's Common Stock is not listed on any exchange and it is
not anticipated that a secondary market will develop. In view of this, the Board
of Directors of the Fund intends to consider each quarter making tender offers
(each, a "Tender Offer") to repurchase all or a portion of the Common Stock of
the Fund from stockholders at a price per share equal to the net asset value per
share of the Common Stock determined at the close of business on the day an
offer terminates. The Board is under no obligation to authorize the making of a
Tender Offer and no assurance can be given that in any particular quarter a
Tender Offer will be made. Further, the Fund will not conduct a Tender Offer for
Fund shares unless the Portfolio simultaneously conducts a tender offer for
Portfolio interests. If a Tender Offer is not made, stockholders may be unable
to sell their shares. Shares of Common Stock that have been held for less than
four years and which are repurchased by the Fund pursuant to Tender Offers will
be subject to an early withdrawal charge of up to 3% of the lesser of the then
current net asset value or the original purchase price of the Common Stock being
tendered. See "Tender Offers" and "Early Withdrawal Charge."

SPECIAL CONSIDERATIONS AND RISK FACTORS. There is no secondary market for the
Fund's Common Stock, and the Fund does not expect a secondary market to develop.
Moreover, A I M Distributors, Inc. ("AIM Distributors" or the "Distributor") and
other selected dealers are prohibited under applicable law from making a market
in the Fund's Common Stock while the Fund is making either a public offering of
or a tender offer to repurchase its Common Stock. To the extent a secondary
market does develop, however, investors should be aware that shares of
closed-end funds frequently trade in the secondary market at a discount from
their net asset values. Should there be a secondary market for the Fund's shares
of Common Stock, the market price of the shares may vary from net asset value
from time to time.

Because of the lack of a secondary market and the early withdrawal charge, the
Fund is designed primarily for long-term investors and should not be considered
a vehicle for trading purposes.

The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio, a separate, non-diversified, closed-end investment
company that has the same investment objective as the Fund. As this structure is
different from many other investment companies that directly acquire and manage
their own portfolios, investors should carefully consider this investment
approach.

Each of the Fund and the Portfolio has registered as a "non-diversified"
investment company so that it will be able to invest more than 5% of its assets
in the obligations of any single issuer, subject to the diversification
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to the Fund (and which the Portfolio intends to
satisfy). Since the Port-

4
<PAGE> 8

folio may invest a relatively high percentage of its assets in the obligations
of a limited number of issuers, the Fund may be more susceptible than a more
widely diversified fund to any single economic, political or regulatory
occurrence. However, the Portfolio has no current intention of investing more
than 15% of its assets in the obligations of any single Borrower.

Although the Portfolio may, consistent with its fundamental limitations,
invest up to 25% of its total assets in the obligations of Borrowers in any
single industry, the Sub-advisor has no current intention of investing more than
20% of the Portfolio's assets in the obligations of Borrowers in any single
industry. However, because the Fund and the Portfolio regard the issuer of a
Corporate Loan as including the Agent Bank and any Intermediate Participant as
well as the Borrower, the Portfolio may be deemed to be concentrated in
securities of issuers in the industry group consisting of financial institutions
and their holding companies, including commercial banks, thrift institutions,
insurance companies and finance companies. As a result, the Portfolio is subject
to certain risks associated with such institutions, including, among other
things, changes in governmental regulation, interest rate levels and general
economic conditions. See "Investment Objective and Policies -- Description of
Participation Interests and Assignments" and "Investment Restrictions."

The Portfolio may invest all or substantially all of its assets in Corporate
Loans, Corporate Debt Securities or other securities that are rated below
investment grade by Moody's, comparably rated by another NRSRO, or, if unrated,
deemed by the Sub-advisor to be of equivalent quality. However, the Sub-advisor
does not expect to invest in any securities rated lower than B3 by Moody's at
the time of investment. Instruments rated below investment grade by Moody's are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
Lower quality instruments are also generally considered to be subject to greater
risk than higher quality instruments with regard to a deterioration of general
economic conditions.

The Corporate Loans, Corporate Debt Securities and other debt obligations in
which the Portfolio may invest are subject to the risk of nonpayment of
scheduled interest or principal payments. In the event that a nonpayment occurs,
the Portfolio may experience a decline in the value of the debt obligations,
resulting in a decline in the net asset value of the Fund's shares of Common
Stock. There is no assurance that the liquidation of collateral underlying
Corporate Loans and Corporate Debt Securities will satisfy the related
Borrowers' obligations in the event of nonpayment of scheduled interest or
principal, or that the collateral could be readily resold.

Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer that can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.

Generally, changes in interest rates may affect the market value of debt
investments, resulting in changes in the net asset value of the shares of funds
investing in such investments. It is expected, however, that a portfolio
consisting primarily of floating and variable rate Corporate Loans, Corporate
Debt Securities, Unsecured Corporate Loans, Unsecured Corporate Debt Securities,
and short-term instruments will experience less significant fluctuations in
value as a result of interest rate changes than would a portfolio of fixed rate
obligations. However, prepayments of principal by Borrowers (whether as a result
of a decline in interest rates or excess cash flow) may require that the
Portfolio replace its Corporate Loan, Corporate Debt Security or other
investment with a lower yielding security, which may adversely affect the net
asset value of the Portfolio.

Some or all of the Corporate Loans and Corporate Debt Securities in which the
Portfolio may invest will be considered to be illiquid, which may impair the
Portfolio's ability to realize the full value of its assets in the event of a
voluntary or involuntary liquidation of such assets. To the extent that such
investments are illiquid, the Portfolio may have difficulty disposing of
portfolio securities and the Fund may in turn have difficulty repurchasing
shares of its Common Stock pursuant to Tender Offers, if any. The Board of
Directors of the Fund will consider the liquidity of the Portfolio's securities
in determining whether a Tender Offer should be made by the Fund and, if so, for
what percentage of the Fund's outstanding shares the Tender Offer should be
made. See "Determination of Net Asset Value" for information with respect to the
valuation of illiquid Corporate Loans.

The Fund's Articles of Incorporation include provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Directors and could
have the effect of depriving holders of Common Stock of an opportunity to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund. See "Description of Capital
Stock -- Certain Anti-Takeover Provisions of the Articles of Incorporation."

The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos and La Familia AIM de Fondos and Design are registered
service marks and Invest With Discipline and AIM Bank Connection are service
marks of A I M Management Group Inc.

5
<PAGE> 9

THE FUND

- --------------------------------------------------------------------------------

TABLE OF FEES AND EXPENSES

The following table is intended to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly.

<TABLE>
<S> <C>
Stockholder Transaction Expenses
Sales Load (as a percentage of offering price)............ None
Dividend Reinvestment Plan Fees........................... None
Maximum Early Withdrawal Charge(1)........................ 3%
Annual Fund and Allocated Portfolio Operating Expenses (as a
percentage of net assets attributable to Common Stock)(2)
Investment Management and Administrative Fee.............. 0.95%
Administrative Fee(3)..................................... 0.25%
Other Expenses (after reimbursement)(4)................... 0.30%
----
Total Annual Operating Expenses (after
reimbursement).................................... 1.50%
====
</TABLE>

- ---------------

(1)Calculated based on the lesser of the then current net asset value or the
original price of the shares being tendered. The maximum early withdrawal
charge applies to shares sold to the Fund pursuant to a Tender Offer during
the first year after purchase; the early withdrawal charge declines annually
thereafter, reaching zero after four years. See "Early Withdrawal Charge."

(2)See "Management" for additional information.

(3)See "Management" for additional information.

(4)"Other Expenses," which include transfer agency, custodial, audit and legal
fees, reflect the commitment of AIM to reimburse Fund expenses (exclusive of
brokerage commissions, taxes, interest, and extraordinary expenses) over
1.50% annually. Without such reimbursement, "Other Expenses" and "Total
Annual Operating Expenses" would be approximately 1.32% and 2.52%,
respectively. See "Management."

EXAMPLE. The following Example demonstrates the projected dollar amount of
total cumulative expense that would be incurred over various periods with
respect to a hypothetical investment in the Fund. These amounts are based upon
payment by the Fund and the Portfolio of operating expenses at the levels set
forth in the above table.

An investor would directly or indirectly pay the following expenses of a
$1,000 investment in the Fund, assuming (i) a 5% annual return and (ii)
reinvestment of all dividends and other distributions at net asset value:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Assuming no tender of Common Stock............... $15 $48 $82 $180
Assuming tender and repurchase of Common Stock on
last day of period and imposition of maximum
applicable Early Withdrawal Charge............. $45 $68 $82 $180
</TABLE>

This Example assumes that the percentage amounts listed under Total Annual
Operating Expenses remain the same in the years shown, except, as to "10 Years,"
for the completion of organizational expense amortization over a five year
period. The above tables and the assumption in the Example of a 5% annual return
and reinvestment at net asset value are required by regulation of the Securities
and Exchange Commission applicable to all closed-end investment companies; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of the Common Stock. Actual expenses and annual
rates of return may be more or less than those assumed for purposes of the
Example. In addition, although the Example assumes reinvestment of all dividends
and other distributions at net asset value, participants in the Plan may receive
shares of the Common Stock obtained at or based on the market price in effect at
the time, which may be at, above or below net asset value.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE FUND'S AND THE PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.

6
<PAGE> 10

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

Contained below is per share operating performance data for a share
outstanding, total investment return, ratios and supplemental data. This
information has been derived from information provided in the financial
statements. The financial statements and notes for the fiscal year ended
December 31, 1997, have been audited by , independent accountants.

<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
JANUARY 1, 1998 OF OPERATIONS) TO
TO JUNE 30, 1998 DECEMBER 31, 1997
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period...................... $ 10.00
-------- --------
Income from investment operations:
Net investment income..................................... 0.46
Net realized and unrealized gain on investments........... 0.02
-------- --------
Net increase from investment operations................ 0.48
-------- --------
Distributions to shareholders:
From net investment income................................ (0.46)
-------- --------
Net asset value, end of period.............................. $ 10.02
======== ========
5.04%(b)
Total investment return(c)..................................
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $161,697
Ratio of net investment income to average net assets:
With expense reductions................................... 7.26%(a)
Without expense reductions................................ 6.24%(a)
Ratio of expenses to average net assets:
With expense reimbursement by INVESCO (NY), Inc........... 1.50%(a)
Without expense reimbursement by INVESCO (NY), Inc........ 2.52%(a)
Ratio of interest expense to average net assets............. 0.15%(a)
Portfolio turnover rate..................................... 118%(a)
</TABLE>

- ---------------

(a)
Annualized

(b)
Not annualized

- --------------------------------------------------------------------------------

USE OF PROCEEDS

The net proceeds from the sale of the Common Stock offered hereby will be
invested on an ongoing basis in the Portfolio, a separate closed-end,
non-diversified management investment company with the same investment objective
as the Fund. The Portfolio will invest the Fund's net proceeds in accordance
with the Fund's and the Portfolio's investment objective and policies on an
ongoing basis, depending on the availability of Corporate Loans and Corporate
Debt Securities and other relevant conditions. Pending such investment, it is
anticipated that the proceeds will be invested in short-term debt obligations or
instruments. See "Investment Objective and Policies."

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The Fund's and the Portfolio's investment objective is to provide as high a
level of current income and preservation of capital as is consistent with
investment in senior secured Corporate Loans and Corporate Debt Securities that
meet credit standards established by AIM and the Sub-advisor. This is a
fundamental policy of the Fund and may not be changed without a vote of a
majority of the outstanding shares of the Fund. There can be no assurance that
the investment objective of the Fund will be achieved.

All of the Fund's assets will be invested in the Portfolio. Under normal
market conditions, the Portfolio will invest at least 80% of its total assets in
interests in Corporate Loans and Corporate Debt Securities made to or issued by
Borrowers (which may include U.S. and

7
<PAGE> 11

non-U.S. companies), including those that: (i) have variable rates which adjust
to a base rate, such as the LIBOR on set dates, typically every 30 days but not
to exceed one year; and/or (ii) have interest rates that float at a margin above
a generally recognized base lending rate such as the Prime Rate of a designated
U.S. bank. The Portfolio may invest up to 20% of its total assets in any of the
following: (a) senior floating rate loans made and notes issued on an unsecured
basis to Borrowers that meet the credit standards established by AIM and the
Sub-advisor ("Unsecured Corporate Loans" and "Unsecured Corporate Debt
Securities"); (b) secured or unsecured short-term debt obligations including,
but not limited to, U.S. Government and Government agency securities (some of
which may not be backed by the full faith and credit of the United States),
money market instruments (such as certificates of deposit and bankers'
acceptances), corporate and commercial obligations (such as commercial paper and
medium-term notes) and repurchase agreements, none of which are required to be
secured but all of which will be (or counterparties associated therewith will
be) investment grade (i.e., rated Baa, P-3 or higher by Moody's or BBB, A-3 or
higher by Standard & Poor's or, if unrated, determined to be of comparable
quality in the judgment of the Sub-advisor); (c) fixed rate obligations of U.S.
or non-U.S. companies that meet the credit standards established by AIM and the
Sub-advisor and that the Portfolio expects to swap for a floating rate
structure; or (d) cash or cash equivalents. Securities rated Baa, BBB, P-3 or
A-3 are considered to have adequate capacity for payment of principal and
interest, but are more susceptible to adverse economic conditions and, in the
case of securities rated BBB or Baa (or comparable unrated securities), have
speculative characteristics. Such securities or cash will not exceed 20% of the
Portfolio's total assets except (i) during interim periods pending investment of
the net proceeds of public offerings of the Fund's securities, (ii) pending
reinvestment of proceeds of the sale of a security, and (iii) during temporary
defensive periods when, in the opinion of the Sub-adviser, suitable Corporate
Loans and Corporate Debt Securities are not available for investment by the
Portfolio or prevailing market or economic conditions warrant. Investments in
Unsecured Corporate Loans and Unsecured Corporate Debt Securities will be made
on the same basis as investments in Corporate Loans and Corporate Debt
Securities as described herein, except with respect to collateral requirements.
To a limited extent, incidental to and in connection with its lending
activities, the Portfolio also may acquire warrants and other equity securities.

The Portfolio has no restrictions on portfolio maturity, but it is anticipated
that a majority of the Corporate Loans and Corporate Debt Securities in which it
invests will have stated maturities ranging from three to ten years. However,
Corporate Loans usually will require, in addition to scheduled payments of
interest and principal, the prepayment of the Corporate Loan from excess cash
flow, as discussed above, and may permit the Borrower to prepay at its election.
The degree to which Borrowers prepay Corporate Loans, whether as a contractual
requirement or at their election, cannot be predicted with accuracy, and may be
affected by general business conditions, the financial condition of the Borrower
and competitive conditions among lenders, among other factors. However, it is
anticipated that the Portfolio's Corporate Loans and Corporate Debt Securities
will have an expected average life of three to five years. See "Description of
Corporate Loans and Corporate Debt Securities."

Investment in shares of Common Stock of the Fund offers several benefits. The
Fund offers investors the opportunity to receive a high level of current income
by investing in a professionally managed portfolio comprised primarily of
Corporate Loans, a type of investment typically not available directly to
individual investors. In managing the Portfolio, the Sub-advisor provides the
Portfolio, the Fund and its stockholders with professional credit analysis and
portfolio diversification. The Fund also relieves the investor of the burdensome
administrative details involved in managing a portfolio of such investments, if
available to individual investors. The benefits are at least partially offset by
the expenses involved in operating an investment company. Such expenses
primarily consist of the management and administrative fees and operations
costs.

Generally, the net asset value of the shares of an investment company which
invests primarily in fixed-income securities changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a
fixed-income portfolio can be expected to decline. The Sub-advisor expects the
Fund's net asset value to be relatively stable during normal market conditions,
because the Portfolio in which the Fund's assets are invested will consist
primarily of floating and variable rate Corporate Loans and Corporate Debt
Securities, of fixed rate Corporate Loans and Corporate Debt Securities hedged
by interest rate swap transactions and of short-term instruments. For these
reasons, the Sub-advisor expects the value of the Portfolio to fluctuate
significantly less as a result of interest rate changes than would a portfolio
of fixed-rate obligations. However, because variable interest rates only reset
periodically, the Fund's net asset value may fluctuate from time to time in the
event of an imperfect correlation between either the interest rates on variable
rate loans in the Portfolio or the variable interest rates on nominal amounts in
the Portfolio's interest rate swap transactions, and prevailing interest rates.
Also, a default on a Corporate Loan or Corporate Security in which the Portfolio
has invested or a sudden and extreme increase in prevailing interest rates may
cause a decline in the Fund's net asset value. Conversely, a sudden and extreme
decline in interest rates could result in an increase in the Fund's net asset
value.

Each of the Fund and the Portfolio is classified as non-diversified within the
meaning of the 1940 Act, which means that neither the Fund nor the Portfolio is
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. However, the Portfolio's investments will be
limited so as to enable the Fund to qualify as a "regulated investment company"
("RIC") for purposes of the Code. Accordingly, the Portfolio will limit its
investments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the value of its total assets will be invested in the
securities (including Corporate Loans but excluding U.S. Government securities)
of a single issuer and (ii) with respect to 50% of the value of its total
assets, its investments will consist of cash, U.S. Government securities and
securities of other issuers limited, in respect of any one issuer, to not more
than 5% of the value of its total assets and not more than 10% of the issuer's
outstanding voting securities. To the extent the Portfolio assumes large
positions in the securities of a small number of issuers, the Fund's yield may
fluctuate to a greater extent than that of a diversified company as a result

8
<PAGE> 12

of changes in the financial condition or in the market's assessment of the
issuers. However, the Portfolio has no current intention of investing more than
15% of its assets in the obligations of any single Borrower.

DESCRIPTION OF CORPORATE LOANS AND CORPORATE DEBT SECURITIES

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests primarily consist of obligations of a Borrower undertaken to finance the
growth of the Borrower's business internally or externally, or to finance a
capital restructuring. Corporate Loan and Corporate Debt Securities may also
include senior obligations of a Borrower issued in connection with a
restructuring pursuant to Chapter 11 of the United States Bankruptcy Code
provided that such senior obligations meet the credit standards established by
AIM and the Sub-advisor. It is anticipated that a significant portion of such
Corporate Loans and Corporate Debt Securities may be issued in highly leveraged
transactions such as leveraged buy-out loans, leveraged recapitalization loans
and other types of acquisition financing. Such Corporate Loans and Corporate
Debt Securities present special risks. See "Special Considerations and Risk
Factors." Such Corporate Loans may be structured to include both term loans,
which are generally fully funded at the time of the Portfolio's investment, and
revolving credit facilities, which would require the Portfolio to make
additional investments in the Corporate Loans as required under the terms of the
credit facility. Such Corporate Loans may also include receivables purchase
facilities, which are similar to revolving credit facilities secured by a
Borrower's receivables.

The Portfolio may invest in Corporate Loans and Corporate Debt Securities
which are made to non-U.S. Borrowers, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars, and any
such Borrower meets the credit standards established by AIM and the Sub-advisor
for U.S. Borrowers. The Portfolio similarly may invest in Corporate Loans and
Corporate Debt Securities made to U.S. Borrowers with significant non-U.S.
dollar-denominated revenues, provided that the loans are U.S. dollar-denominated
or otherwise provide for payment to the Portfolio in U.S. dollars. In all cases
where the Corporate Loans or Corporate Debt Securities are not denominated in
U.S. dollars, provision will be made for payments to the Lenders, including the
Portfolio, in U.S. dollars pursuant to foreign currency swap arrangements. Loans
to such non-U.S. Borrowers or U.S. Borrowers may involve risks not typically
involved in domestic investment, including fluctuation in foreign exchange
rates, future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign or U.S. governmental laws or
restrictions applicable to such loans. With respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
the Portfolio's investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment position. In
addition, information with respect to non-U.S. Borrowers may differ from that
available with respect to U.S. Borrowers, since foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
Borrowers.

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will, in most instances, hold the most senior position in the
capitalization structure of the Borrower, and in any case will, in the judgment
of the Sub-advisor, be in the category of senior debt of the Borrower. Each
Corporate Loan and Corporate Debt Security will generally be secured by
collateral the value of which generally will be determined by reference to
financial statements of the Borrower, by an independent appraisal, by obtaining
the market value of such collateral (e.g., cash or securities) if it is readily
ascertainable and/or by other customary valuation techniques considered
appropriate in the judgment of the Sub-advisor. The Sub-advisor generally
expects the value of the collateral securing a Corporate Loan or Corporate Debt
Security to be greater than the value of such Corporate Loan or Corporate Debt
Security. However, the value of such collateral may be equal to or less than the
value of the Corporate Loan or Corporate Debt Security that it secures.
Accordingly, in the event of a default, the Fund may incur a loss. The ability
of the Lender to have access to the collateral may be limited by bankruptcy and
other insolvency laws. Under certain circumstances, the collateral may be
released with the consent of the Agent Bank and Lenders or pursuant to the terms
of the underlying credit agreement with the Borrower or bond indenture. There is
no assurance that the liquidation of the collateral would satisfy the Borrower's
obligation in the event of nonpayment of scheduled interest or principal, or
that the collateral could be readily liquidated. As a result, the Portfolio
might not receive payments to which it is entitled and thereby may experience a
decline in the value of the investment and, possibly, its net asset value.

In the case of highly leveraged loans, a Borrower generally is required to
pledge collateral which may include (i) working capital assets, such as accounts
receivable or inventory, (ii) tangible fixed assets, such as real property,
buildings and equipment, (iii) intangible assets, such as trademarks, copyrights
and patent rights and (iv) security interests in securities of subsidiaries or
affiliates. In the case of Corporate Loans to or Corporate Debt Securities of
privately held companies, the companies' owners may pledge additional security
in the form of guarantees and/or other securities that they own. There may be
temporary periods in the course of providing financing to a Borrower where the
collateral for the loan consists of common stock having a value not less than
200% of the value of the loan on the date the loan is made. Under such
circumstances, the Borrower generally proceeds with a subsequent transaction
which will permit it to pledge assets of a company as collateral for the loan,
although there can be no assurance that the Borrower will be able to effect such
transaction.

The rate of interest payable on floating or variable rate Corporate Loans or
Corporate Debt Securities is established as the sum of a base lending rate plus
a specified margin. These base lending rates generally are LIBOR, the Prime Rate
of a designated U.S. bank, or another base lending rate used by commercial
lenders. The interest rate on Prime Rate-based Corporate Loans and Corporate
Debt Securities floats daily as the Prime Rate changes, while the interest rate
on LIBOR-based Corporate Loans and Corporate Debt Securi-

9
<PAGE> 13

ties is reset periodically, typically every 30 days to one year. Certain of the
floating or variable rate Corporate Loans and Corporate Debt Securities in which
the Portfolio will invest may permit the Borrower to select an interest rate
reset period of up to one year. A portion of the Portfolio's investments may
consist of Corporate Loans with interest rates that are fixed for the term of
the loan. Investment in Corporate Loans and Corporate Debt Securities with
longer interest rate reset periods or fixed interest rates may increase
fluctuations in the Fund's net asset value as a result of changes in interest
rates. However the Fund will attempt to hedge all of its fixed-rate Corporate
Loans and Corporate Debt Securities against fluctuations in interest rates by
entering into interest rate swap transactions. The Portfolio also will attempt
to maintain a portfolio of Corporate Loans and Corporate Debt Securities that
will have a dollar weighted average period to the next interest rate adjustment
of no more than 90 days.

Corporate Loans and Corporate Debt Securities traditionally have been
structured so that Borrowers pay higher margins when they elect LIBOR, in order
to permit lenders to obtain generally consistent yields on Corporate Loans and
Corporate Debt Securities, regardless of whether Borrowers select the LIBOR
option, or the Prime-based option. In recent years, however, the differential
between the lower LIBOR base rates and the higher Prime Rate base rates
prevailing in the commercial bank markets has widened to the point where the
higher margins paid by Borrowers for LIBOR pricing options do not currently
compensate for the differential between the Prime Rate and the LIBOR rates.
Consequently, Borrowers have increasingly selected the LIBOR-based pricing
option, resulting in a yield on Corporate Loans and Corporate Debt Securities
that is consistently lower than the yield would be if Borrowers selected the
Prime Rate-based pricing option. This trend will significantly limit the ability
of the Fund to achieve a net return to stockholders that consistently
approximates the average published prime rate of leading U.S. banks. At the date
of this Prospectus, the Sub-advisor cannot predict any significant change in
this market trend.

The Portfolio may receive and/or pay certain fees in connection with its
lending activities. These fees are in addition to interest payments received and
may include facility fees, commitment fees, commissions and prepayment penalty
fees. When the Portfolio buys a Corporate Loan or Corporate Debt Security it may
receive a facility fee and when it sells a Corporate Loan or Corporate Debt
Security may pay a facility fee. In certain circumstances, the Portfolio may
receive a prepayment penalty fee on the prepayment of a Corporate Loan or
Corporate Debt Security by a Borrower. In connection with the acquisition of
Corporate Loans or Corporate Debt Securities, the Portfolio may also acquire
warrants and other equity securities of the Borrower or its affiliates. The
acquisition of such equity securities will only be incidental to the Portfolio's
purchase of a Corporate Debt Security or an interest in a Corporate Loan.

The Portfolio invests in a Corporate Loan or Corporate Debt Security only if,
in the Sub-advisor's judgment, the Borrower can meet debt service on such loan
or security. In addition, the Sub-advisor considers other factors deemed by it
to be appropriate to the analysis of the Borrower and the Corporate Loan or
Corporate Debt Security. Such factors include financial ratios of the Borrower
such as interest coverage, fixed charge coverage and leverage ratios. In its
analysis of these factors, the Sub-advisor also will be influenced by the nature
of the industry in which the Borrower is engaged, the nature of the Borrower's
assets and the Sub-advisor's assessment of the general quality of the Borrower.
The factors utilized have been reviewed by the Portfolio's Board of Trustees.

The primary consideration in selecting such Corporate Loans and Corporate Debt
Securities for investment by the Portfolio is the creditworthiness of the
Borrower. In evaluating Corporate Loans and Corporate Debt Securities, the
quality ratings assigned to other debt obligations of a Borrower may not be a
determining factor, since they will often be subordinated to the Corporate Loans
or Corporate Debt Securities. Instead, the Sub-advisor performs its own
independent credit analysis of the Borrower, and of the collateral structure for
the loan or security. In making this analysis, the Sub-advisor utilizes any
offering materials and in the case of Corporate Loans, information prepared and
supplied by the Agent Bank, Lender or Participant from whom the Portfolio
purchases its Participation Interest in a Corporate Loan. The Sub-advisor's
analysis will continue on an ongoing basis for any Corporate Loans and Corporate
Debt Securities in which the Portfolio has invested. Although the Sub-advisor
will use due care in making such analysis, there can be no assurance that such
analysis will disclose factors which may impair the value of the Corporate Loan
or Corporate Debt Security.

Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer which can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.

A Borrower also must comply with various restrictive covenants contained in
any Corporate Loan agreement between the Borrower and the lending syndicate
("Corporate Loan Agreement") or in any trust indenture or comparable document in
connection with a Corporate Debt Security ("Corporate Debt Security Document").
Such covenants, in addition to requiring the scheduled payment of interest and
principal, may include restrictions on dividend payments and other distributions
to stockholders, provisions requiring the Borrower to maintain specific
financial ratios or relationships and limits on total debt. In addition, the
Corporate Loan Agreement or Corporate Debt Security Document may contain a
covenant requiring the Borrower to prepay the Corporate Loan or Corporate Debt
Security with any excess cash flow. Excess cash flow generally includes net cash
flow after scheduled debt service payments and permitted capital expenditures,
among other things, as well as the proceeds from asset dispositions or sales of
securities. A breach of a covenant (after giving effect to any cure period) in a
Corporate Loan Agreement which is not waived by the Agent Bank and the lending
syndicate normally is an event of acceleration; i.e., the Agent Bank has the
right to demand immediate repayment in full of the outstanding Corporate Loan.
Acceleration may also occur in the case of the breach of a covenant in a
Corporate Debt Security Document.

10
<PAGE> 14

It is expected that a majority of the Corporate Loans and Corporate Debt
Securities held by the Portfolio will have stated maturities ranging from three
to ten years. However, such Corporate Loans and Corporate Debt Securities
usually will require, in addition to scheduled payments of interest and
principal, the prepayment of the Corporate Loan or Corporate Debt Security from
excess cash flow, as discussed above, and may permit the Borrower to prepay at
its election. The degree to which Borrowers prepay Corporate Loans and Corporate
Debt Securities, whether as a contractual requirement or at their election, may
be affected by general business conditions, the financial condition of the
Borrower and competitive conditions among lenders, among other factors.
Accordingly, prepayments cannot be predicted with accuracy. Upon a prepayment,
the Portfolio may receive both a prepayment penalty fee from the prepaying
Borrower and a facility fee on the purchase of a new Corporate Loan or Corporate
Debt Security with the proceeds from the prepayment of the former. Such fees may
help mitigate any adverse impact on the yield on the Portfolio's investments
which may arise as a result of prepayments and the reinvestment of such proceeds
in Corporate Loans or Corporate Debt Securities bearing lower interest rates.

Loans to non-U.S. Borrowers and to U.S. Borrowers with significant non-U.S.
dollar-denominated revenues may provide for conversion of all or part of the
loan from a U.S. dollar-denominated obligation into a foreign currency
obligation at the option of the Borrower. The Portfolio may invest in Corporate
Loans and Corporate Debt Securities which have been converted into non-U.S.
dollar-denominated obligations only when provision is made for payments to the
lenders in U.S. dollars pursuant to foreign currency swap arrangements. Foreign
currency swaps involve the exchange by the lenders, including the Portfolio,
with another party (the "counterparty") of the right to receive the currency in
which the loans are denominated for the right to receive U.S. dollars. The
Portfolio will enter into a transaction subject to a foreign currency swap only
if, at the time of entering into such swap, the outstanding debt obligations of
the counterparty are investment grade, i.e., rated BBB or A-3 or higher by
Standard & Poor's or Baa or P-3 or higher by Moody's or determined to be of
comparable quality in the judgment of the Sub-advisor. The amounts of U.S.
dollar payments to be received by the lenders and the foreign currency payments
to be received by the counterparty are fixed at the time the swap arrangement is
entered into. Accordingly, the swap protects the Portfolio from the fluctuations
in exchange rates and locks in the right to receive payments under the loan in a
predetermined amount of U.S. dollars. If there is a default by the counterparty,
the Portfolio will have contractual remedies pursuant to the swap arrangements;
however, the U.S. dollar value of the Portfolio's right to foreign currency
payments under the loan will be subject to fluctuations in the applicable
exchange rate to the extent that a replacement swap arrangement is unavailable
or the Portfolio is unable to recover damages from the defaulting counterparty.
If the Borrower defaults on or prepays the underlying Corporate Loan or
Corporate Debt Security, the Portfolio may be required pursuant to the swap
arrangements to compensate the counterparty to the extent of fluctuations in
exchange rates adverse to the counterparty. In the event of such a default or
prepayment, an amount of cash or high grade liquid debt securities having an
aggregate net asset value at least equal to the amount of compensation that must
be paid to the counterparty pursuant to the swap arrangements will be maintained
in a segregated account by the Portfolio's custodian.

DESCRIPTION OF PARTICIPATION INTERESTS AND ASSIGNMENTS

A Corporate Loan in which the Portfolio may invest typically is originated,
negotiated and structured by a syndicate of Lenders consisting of commercial
banks, thrift institutions, insurance companies, finance companies or other
financial institutions, which is administered on behalf of the syndicate by an
Agent Bank. The investment of the Portfolio in a Corporate Loan may take the
form of Participation Interests or Assignments. Participation Interests may be
acquired from a Lender or other Participants. If the Portfolio purchases a
Participation Interest either from a Lender or a Participant, the Portfolio will
not have established any direct contractual relationship with the Borrower. The
Portfolio would be required to rely on the Lender or the Participant that sold
the Participation Interest not only for the enforcement of the Portfolio's
rights against the Borrower but also for the receipt and processing of payments
due to the Portfolio under the Corporate Loans. The Portfolio is thus subject to
the credit risk of both the Borrower and a Participant. Lenders and Participants
interposed between the Portfolio and a Borrower, together with Agent Banks, are
referred to herein as "Intermediate Participants."

On the other hand, if the Portfolio purchases an Assignment from a Lender, the
Portfolio will generally become a "Lender" for purposes of the relevant loan
agreement, with direct contractual rights thereunder and under any related
collateral security documents in favor of the Lenders. An Assignment from a
Lender gives the Portfolio the right to receive payments of principal and
interest and other amount directly from the Borrower and to enforce its rights
as a Lender directly against the Borrower. The Portfolio will not act as an
Agent Bank guarantor, sole negotiator or sole structuror with respect to a
Corporate Loan.

Because it may be necessary to assert through an Intermediate Participant such
rights as may exist against the Borrower, in the event the Borrower fails to pay
principal and interest when due, the Portfolio may be subject to delays,
expenses and risks that are greater than those that would be involved if the
Portfolio could enforce its rights directly against the Borrower. Moreover,
under the terms of a Participation, the Portfolio may be regarded as a creditor
of the Intermediate Participant (rather than of the Borrower), so that the
Portfolio may also be subject to the risk that the Intermediate Participant may
become insolvent. Similar risks may arise with respect to the Agent Bank, as
described below. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the Corporate Loan may be
subject to certain defenses that can be asserted by such Borrower as a result of
improper conduct by the Agent Bank or Intermediate Participant. The Portfolio
will invest in Corporate Loans only if, at the time of investment, all
outstanding debt obligations of the Agent Bank and Intermediate Participants are
investment grade, i.e., rated BBB or

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<PAGE> 15

A-3 or higher by Standard & Poor's or Baa or P-3 or higher by Moody's or
determined to be of comparable quality in the judgment of the Sub-advisor.

The Portfolio has no current intention of investing more than 20% of its
assets in the obligations of Borrowers in any single industry. However, because
the Fund and the Portfolio will regard the issuer of a Corporate Loan as
including the Agent Bank and any Intermediate Participant as well as the
Borrower, the Portfolio may be deemed to be concentrated in securities of
issuers in the industry group consisting of financial institutions and their
holding companies, including commercial banks, thrift institutions, insurance
companies and finance companies. As a result, the Portfolio is subject to
certain risks associated with such institutions. Banking and thrift institutions
are subject to extensive governmental regulations which may limit both the
amounts and types of loans and other financial commitments which such
institutions may make and the interest rates and fees which such institutions
may charge. The profitability of these institutions is largely dependent on the
availability and cost of capital funds, and has shown significant recent
fluctuation as a result of volatile interest rate levels. In addition, general
economic conditions are important to the operations of these institutions, with
exposure to credit losses resulting from possible financial difficulties of
borrowers potentially having an adverse effect. Insurance companies are also
affected by economic and financial conditions and are subject to extensive
government regulation, including rate regulation. The property and casualty
companies may be exposed to material risks, including reserve inadequacy, latent
health exposure and inability to collect from their reinsurance carriers. The
financial services area is currently undergoing relatively rapid change as
existing distinctions between financial service segments become less clear. In
this regard, recent business combinations have included insurance, finance and
securities brokerage under single ownership. Moreover, the federal laws
generally separating commercial and investment banking are currently being
studied by Congress.

In a typical Corporate Loan, the Agent Bank administers the terms of the
Corporate Loan Agreement and is responsible for the collection of principal and
interest and fee payments from the Borrower and the apportionment of these
payments to the credit of all lenders which are parties to the Corporate Loan
Agreement. The Portfolio generally will rely on the Agent Bank or an
Intermediate Participant to collect its portion of the payments on the Corporate
Loan. Furthermore, the Portfolio will rely on the Agent Bank to use appropriate
creditor remedies against the Borrower. Typically, under Corporate Loan
Agreements, the Agent Bank is given broad discretion in enforcing the Corporate
Loan Agreement, and is obligated to use only the same care it would use in the
management of its own property. The Borrower compensates the Agent Bank for
these services. Such compensation may include special fees paid on structuring
and funding the Corporate Loan and other fees paid on a continuing basis.

In the event that an Agent Bank becomes insolvent, or has a receiver,
conservator, or similar official appointed for it by the appropriate bank
regulatory authority or becomes a debtor in a bankruptcy proceeding, assets held
by the Agent Bank under the Corporate Loan Agreement should remain available to
holders of Corporate Loans. If, however, assets held by the Agent Bank for the
benefit of the Portfolio were determined by an appropriate regulatory authority
or court to be subject to the claims of the Agent Bank's general or secured
creditors, the Portfolio might incur certain costs and delays in realizing
payment on a Corporate Loan or suffer a loss of principal and/or interest. In
situations involving Intermediate Participants, similar risks may arise as
described above.

Intermediate Participants may have certain obligations pursuant to a Corporate
Loan Agreement, which may include the obligation to make future advances to the
Borrower in connection with revolving credit facilities in certain
circumstances. The Portfolio currently intends to reserve against such
contingent obligations by segregating sufficient investments in high quality,
short-term, liquid instruments. The Portfolio will not invest in Corporate Loans
that would require the Portfolio to make any additional investments in
connection with such future advances if such commitments would exceed 20% of the
Portfolio's total assets or would cause the Portfolio to fail to meet the
diversification requirements described under "Investment Objective and
Policies."

ILLIQUID SECURITIES

Corporate Loans and Corporate Debt Securities are, at present, not readily
marketable and may be subject to restrictions on resale. Although Corporate
Loans and Corporate Debt Securities are transferred among certain financial
institutions, as described above, the Corporate Loans and Corporate Debt
Securities in which the Portfolio invests do not have the liquidity of
conventional investment grade debt securities traded in the secondary market and
may be considered illiquid. As the market for Corporate Loans and Corporate Debt
Securities matures, the Sub-advisor expects that liquidity will improve. The
Portfolio has no limitation on the amount of its investments which are not
readily marketable or are subject to restrictions on resale. Such investments,
which may be considered illiquid, may affect the Fund's ability to realize the
net asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio may have
difficulty disposing of securities in order to enable the Fund to repurchase
shares of its Common Stock pursuant to Tender Offers, if any. The Board of
Directors of the Fund will consider the liquidity of the Portfolio's investments
in determining whether a Tender Offer should be made by the Fund. See "Net Asset
Value" for information with respect to the valuation of illiquid Corporate Loans
and Corporate Debt Securities.

OTHER INVESTMENT POLICIES

The Fund and the Portfolio have adopted certain other policies as set forth
below:

LEVERAGE. Each of the Fund and the Portfolio is authorized to borrow money in
amounts of up to 33 1/3% of the value of its total assets at the time of such
borrowings. Borrowings by the Fund and the Portfolio (commonly known as
"leveraging") create an oppor-

12
<PAGE> 16

tunity for greater total return but, at the same time, increase exposure to
capital risk. In addition, borrowed funds are subject to interest costs that may
offset or exceed the return earned on the borrowed funds. Neither the Fund nor
the Portfolio has any current intention of borrowing to finance additional
investments. See "Special Considerations and Risk Factors -- Effects of
Leverage."

REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
The repurchase date usually is within seven days of the original purchase date.
Repurchase agreements are deemed to be loans under the 1940 Act. In all cases,
the Sub-advisor must be satisfied with the creditworthiness of the other party
to the agreement before entering into a repurchase agreement. In the event of
the bankruptcy (or other insolvency proceeding) of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchases may have declined, the Portfolio could experience a loss.

LENDING OF PORTFOLIO SECURITIES. The Portfolio may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets to banks, brokers and other financial institutions and receive collateral
in cash or securities issued or guaranteed by the U.S. Government. Such
collateral will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. This limitation is a
fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Portfolio's outstanding voting securities, as
defined in the 1940 Act. The purpose of such loans is to permit the borrower to
use such securities for delivery to purchasers when such borrower has sold
short. If cash collateral is received by the Portfolio, it is invested in
short-term money market securities, and a portion of the yield received in
respect of such investment is retained by the Portfolio. Alternatively, if
securities are delivered to the Portfolio as collateral, the Portfolio and the
borrower negotiate a rate for the loaned premium to be received by the Portfolio
for lending its portfolio securities. In either event, the total yield on the
Portfolio is increased by loans of its securities. The Portfolio will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. Such loans are terminable at any time. The
Portfolio may pay reasonable finder's, administrative and custodial fees in
connection with such loans. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Portfolio could experience delays and costs in gaining access to the
collateral and could suffer a loss to the extent that the value of the
collateral falls below the market value of the borrowed securities.

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Portfolio may also
purchase and sell interests in Corporate Loans and Corporate Debt Securities and
other portfolio securities on a "when issued" and "delayed delivery" basis. No
income accrues to the Portfolio on such interests or securities in connection
with such transactions prior to the date the Portfolio actually takes delivery
of such interests or securities. These transactions are subject to market
fluctuation; the value of the interests in Corporate Loans and Corporate Debt
Securities and other portfolio debt securities at delivery may be more or less
than their purchase price, and yield generally available on such interests or
securities when delivery occurs may be higher than yields on the interests or
securities obtained pursuant to such transactions. Because the Portfolio relies
on the buyer or seller, as the case may be, to consummate the transaction,
failure by the other party to complete the transaction may result in the
Portfolio missing the opportunity of obtaining a price or yield considered to be
advantageous. When the Portfolio is the buyer in such a transaction, however, it
will segregate with its custodian, cash or other liquid assets having an
aggregate value equal to the amount of such purchase commitments until payment
is made. The Portfolio will make commitments to purchase such interest or
securities on such basis only with the intention of actually acquiring these
interests or securities, but the Portfolio may sell such interests or securities
prior to the settlement date if such sale is considered to be advisable. To the
extent the Portfolio engaged in "when issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring interests or securities
for the Portfolio consistent with the Fund's investment objective and policies
and not for the purpose of investment leverage. No specific limitation exists as
to the percentage of the Portfolio's assets which may be used to acquire
securities on a "when issued" or "delayed delivery" basis.

INTEREST RATE HEDGING TRANSACTIONS. Certain federal income tax requirements
may limit the Portfolio's ability to engage in interest rate hedging
transactions. Gains from transactions in interest rate hedges distributed to
stockholders will be taxable as ordinary income or, in certain circumstances, as
long-term capital gains. See "Taxes."

The Portfolio will enter into interest rate swaps in order to hedge all of its
fixed rate Corporate Loans and Corporate Debt Securities against fluctuations in
interest rates. Interest rate swaps involve the exchange by the Portfolio with
another party of their respective commitments to pay or receive interest, such
as an exchange of fixed rate payments for floating rate payments. For example,
if the Portfolio holds a Corporate Loan or Corporate Security with an interest
rate that is reset only once each year, it may swap the right to receive
interest at this fixed rate for the right to receive interest at a rate that is
reset every week. This would enable the Portfolio to offset a decline in the
value of the Corporate Loan or Corporate Debt Security due to rising interest
rates, but would also limit its ability to benefit from falling interest rates.

Inasmuch as these interest rate hedging transactions are entered into for good
faith hedging purposes, the Sub-advisor believes that such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Portfolio usually will enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the Portfo-

13
<PAGE> 17

lio's obligations over its entitlements with respect to each interest rate swap
will be accrued on a daily basis, and an amount of cash or other liquid assets
having an aggregate net asset value at least equal to the accrued excess will be
segregated by the Portfolio's custodian. If the interest rate swap transaction
is entered into on other than a net basis, the full amount of the Portfolio's
obligations will be accrued on a daily basis, and the full amount of the
Portfolio's obligations will be segregated by the Portfolio's custodian. The
Portfolio will not enter into any interest rate hedging transaction unless the
Sub-advisor considers the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto to be investment grade. If
there is a default by the other party to such a transaction, the Portfolio will
have contractual remedies pursuant to the agreements related to the transaction
but such remedies may be subject to bankruptcy and insolvency laws which could
affect the Portfolio's rights as a creditor. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, many portions of the swap market have become
relatively liquid in comparison with other similar instruments traded in the
interbank market. In addition, although the terms of interest rate swaps may
provide for termination, there can be no assurance the Portfolio will be able to
terminate an interest rate swap or to sell or offset interest rate caps or
floors that it has purchased.

The use of interest rate hedges is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio transactions. If the Sub-advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used.

Except as noted above, there is no limit on the amount of interest rate
hedging transactions that may be entered into by the Portfolio. These
transactions do not involve the delivery of securities or other underlying
assets or principal. Accordingly, the risk of loss with respect to interest rate
hedges is limited to the net amount of interest payments that the Portfolio is
contractually obligated to make. If the Corporate Loan underlying an interest
rate swap is prepaid and the Portfolio continues to be obligated to make
payments to the other party to the swap, the Portfolio would have to make such
payments from another source. If the other party to an interest rate swap
defaults, the Portfolio's risk of loss consists of the net amount of interest
payments that the Portfolio contractually is entitled to receive. Since interest
rate transactions are individually negotiated, the Sub-advisor expects to
achieve an acceptable degree of correlation between the Portfolio's rights to
receive interest on Participation Interests and its rights and obligations to
receive and pay interest pursuant to interest rate swaps.

- --------------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of the Fund and the
Portfolio and, prior to issuance of any preferred stock, may not be changed
without the approval, respectively, of the holders of a majority of the Fund's
or the Portfolio's outstanding shares of Common Stock (which for this purpose
and under the 1940 Act means the lesser of (i) 67% of the shares of Common Stock
represented at a meeting at which more than 50% of the outstanding shares of
Common Stock are represented or (ii) more than 50% of the outstanding shares).
Subsequent to any issuance of a class of preferred stock, the following
investment restrictions could not be changed without the approval of a majority
of the outstanding shares of Common Stock and of the preferred stock, voting
together as a class, and the approval of a majority of the outstanding shares of
preferred stock, voting separately by class. The Fund and the Portfolio each may
not:

1. Borrow money or issue senior securities, except as permitted by
Section 18 of the 1940 Act.

2. Purchase or sell real estate; provided that the Fund and the
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein.

3. Underwrite securities of other issuers except insofar as the Fund
or the Portfolio may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities.

4. Make loans to other persons, except that the Fund and the Portfolio
may invest in loans (including Assignments and Participations, and
including secured or unsecured Corporate Loans), purchase debt securities,
enter into repurchase agreements, and lend its portfolio securities.

5. Invest more than 25% of its total assets in the securities of
issuers in any one industry; provided that this limitation shall not apply
with respect to obligations issued or guaranteed by the U.S. Government or
by its agencies or instrumentalities; and provided further that the Fund
and the Portfolio may each invest more than 25% of its assets in securities
of issuers in the industry group consisting of financial institutions and
their holding companies, including commercial banks, thrift institutions,
insurance companies and finance companies. For purposes of this
restriction, the term "issuer" includes the Borrower, the Agent Bank and
any Intermediate Participant (as defined under "Investment Objective and
Policies Description of Participation Interests and Assignments").

6. Purchase or sell physical commodities, but the Fund and the
Portfolio each may purchase, sell or enter into financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.

14
<PAGE> 18

An additional investment restriction adopted by the Fund and the Portfolio,
which may be changed by their respective Board of Directors or Board of
Trustees, provides that neither the Fund nor the Portfolio may mortgage, pledge,
hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund or the Portfolio except as may be necessary
in connection with hedging techniques involving interest rate transactions,
foreign currency swap transactions relating to non-U.S. dollar-denominated loans
and permitted borrowings by the Fund and the Portfolio.

If a percentage restriction on investment policies or the investment or use of
assets set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing values will not be
considered a violation.

- --------------------------------------------------------------------------------

SPECIAL CONSIDERATIONS AND RISK FACTORS

EFFECTS OF LEVERAGE. Each of the Fund and the Portfolio may borrow money in
amounts up to 33 1/3% of the value of its total assets to finance tender offers,
for temporary, extraordinary or emergency purposes, or for the purpose of
financing additional investments. See "Tender Offers." The Fund also may issue
one or more series of preferred shares, although it has no present intention to
do so. The Portfolio or Fund, as the case may be, may borrow to finance
additional investments or issue a class of preferred shares only when it
believes that the return that may be earned on investments purchased with the
proceeds of such borrowings or offerings will exceed the costs, including debt
service and dividend obligations, associated therewith. However, to the extent
such costs exceed the return on the additional investments, the return realized
by the Fund's Common Stockholders will be adversely affected.

Capital raised through leverage will be subject to interest costs or dividend
payments which may or may not exceed the interest on the assets purchased. The
Fund and the Portfolio also may be required to maintain minimum average balances
in connection with borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. The issuance of additional classes of preferred
shares involves offering expenses and other costs and may limit the Fund's
freedom to pay dividends on shares of Common Stock or to engage in other
activities. Borrowings and the issuance of a class of preferred stock having
priority over the Fund's Common Stock create an opportunity for greater income
per share of Common Stock, but at the same time such borrowing or issuance is a
speculative technique in that it will increase the Fund's exposure to capital
risk. Such risks may be reduced through the use of borrowings and preferred
stock that have floating rates of interest. Unless the income and appreciation,
if any, on assets acquired with borrowed funds or offering proceeds exceeds the
costs of borrowing or issuing additional classes of securities, the use of
leverage will diminish the investment performance of the Fund compared with what
it would have been without leverage.

The Fund has entered into agreements with two financial institutions ("Banks")
providing for unsecured, discretionary credit facilities ("Facilities"), the
proceeds of which may be used to finance, in part, the payment for shares
tendered in a Tender Offer by the Fund. The Facilities provide for the borrowing
by the Fund of up to the lesser of $150,000,000 and $100,000,000, respectively,
or 33 1/3% of the Fund's total assets, on an unsecured, uncommitted basis. Loans
made under the Facilities bear interest at one of three rates, to be selected at
the option of the Fund: (i) an Adjusted Eurodollar Rate, which is based on LIBOR
plus a reserve percentage established by the Federal Reserve; (ii) a Base Rate,
which is the greater of (a) the annual rate of interest announced from time to
time by the Bank and (b) the federal funds effective rate, as established by the
Federal Reserve, plus 1/2 of 1% per annum; and (iii) a Money Market Rate, which
is quoted by the Bank as the fixed rate of interest at which it is willing to
make a "money market" loan.

Under the 1940 Act, neither the Fund nor the Portfolio is permitted to incur
indebtedness unless immediately after such incurrence the Fund or the Portfolio,
as the case may be, has an asset coverage of 300% of the aggregate outstanding
principal balance of indebtedness. Additionally, under the 1940 Act the Fund may
not declare any dividend or other distribution upon any class of its capital
stock, or purchase any such capital stock, unless the aggregate indebtedness of
the Fund has at the time of the declaration of any such dividend or distribution
or at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.

The Fund's and the Portfolio's willingness to borrow money for investment
purposes, and the amount each will borrow, will depend on many factors, the most
important of which are investment outlook, market conditions and interest rates.
Successful use of a leveraging strategy depends on the Sub-advisor's ability to
predict correctly interest rates and market movements, and there is no assurance
that a leveraging strategy will be successful during any period in which it is
employed.

CREDIT RISK. Corporate Loans and Corporate Debt Securities may constitute
substantially all of the Portfolio's investments. Corporate Loans and Corporate
Debt Securities are primarily dependent upon the creditworthiness of the
Borrower for payment of interest and principal. The nonreceipt of scheduled
interest or principal on a Corporate Loan or Corporate Debt Security may
adversely affect the income of the Portfolio or the value of its investments,
which may in turn reduce the amount of dividends or the net asset value of the
shares of the Fund. The Portfolio's ability to receive payment of principal of
and interest on a Corporate Loan or a Corporate Debt Security also depends upon
the creditworthiness of any institution interposed between the Portfolio and the
Borrower. To reduce credit risk, the Sub-advisor actively manages the Portfolio
as described above.

Corporate Loans and Corporate Debt Securities made in connection with
leveraged buy-outs, recapitalizations and other highly leveraged transactions
are subject to greater credit risks than many of the other Corporate Loans and
Corporate Debt Securities in which the Portfolio may invest. These credit risks
include the possibility of a default on the Corporate Loan or Corporate Debt
Security

15
<PAGE> 19

or bankruptcy of the Borrower. The value of such Corporate Loans and Corporate
Debt Securities are subject to a greater degree of volatility in response to
interest rate fluctuations and may be less liquid than other Corporate Loans and
Corporate Debt Securities.

Although Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will generally hold the most senior position in the capitalization
structure of the Borrowers, the capitalization of many Borrowers will include
non-investment grade subordinated debt. During periods of deteriorating economic
conditions, a Borrower may experience difficulty in meeting its payment
obligations under such bonds and other subordinated debt obligations. Such
difficulties may detract from the Borrower's perceived creditworthiness or its
ability to obtain financing to cover short-term cash flow needs and may force
the Borrower into bankruptcy or other forms of credit restructuring.

COLLATERAL IMPAIRMENT. Corporate Loans and Corporate Debt Securities
(excluding Unsecured Corporate Loans and Unsecured Corporate Debt Securities)
will be secured unless (i) the Portfolio's security interest in the collateral
is invalidated for any reason by a court or (ii) the collateral is fully
released under the terms of a loan agreement as the creditworthiness of the
Borrower improves. There is no assurance that the liquidation of collateral
would satisfy the Borrower's obligation in the event of nonpayment of scheduled
interest or principal, or that collateral could be readily liquidated. The value
of collateral generally will be determined by reference to financial statements
of the Borrower, an independent appraisal performed at the request of the Agent
Bank at the time the Corporate Loan was initially made, the market value of such
collateral (e.g., cash or securities) if it is readily ascertainable and/or by
other customary valuation techniques considered appropriate in the judgment of
the Sub-advisor. Collateral is generally valued on the basis of the Borrower's
status as a going concern and such valuation may exceed the immediate
liquidation value of the collateral.

Collateral may include (i) working capital assets, such as accounts receivable
and inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. To the extent that collateral consists of the stock
of the Borrower's subsidiaries or other affiliates, the Portfolio will be
subject to the risk that this stock will decline in value. Such a decline,
whether as a result of bankruptcy proceedings or otherwise, could cause the
Corporate Loan or Corporate Debt Security to be undercollateralized or
unsecured. In most credit agreements there is no formal requirement to pledge
additional collateral. In the case of Corporate Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own. In
addition, the Portfolio may invest in Corporate Loans guaranteed by, or fully
secured by assets of, such shareholders or owners, even if the Corporate Loans
are not otherwise collateralized by assets of the Borrower; provided, however,
that such guarantees are fully secured. There may be temporary periods when the
principal asset held by a Borrower is the stock of a related company, which may
not legally be pledged to secure a Corporate Loan or Corporate Debt Security. On
occasions when such stock cannot be pledged, the Corporate Loan or Corporate
Debt Security will be temporarily unsecured until the stock can be pledged or is
exchanged for or replaced by other assets, which will be pledged as security for
the Corporate Loan or Corporate Debt Security. However, the Borrower's ability
to dispose of such securities, other than in connection with such pledge or
replacement, will be strictly limited for the protection of the holders of
Corporate Loans.

If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Portfolio's security interest in the Corporate Loan or Corporate
Debt Security collateral or subordinate the Portfolio's rights under the
Corporate Loan or Corporate Debt Security to the interests of the Borrower's
unsecured creditors. Such action by a court could be based, for example, on a
"fraudulent conveyance" claim to the effect that the Borrower did not receive
fair consideration for granting the security interest in the Corporate Loan or
Corporate Debt Security collateral to the Portfolio. For Corporate Loans or
Corporate Debt Securities made in connection with a highly leveraged
transaction, consideration for granting a security interest may be deemed
inadequate if the proceeds of the Corporate Loan or Corporate Debt Security were
not received or retained by the Borrower, but were instead paid to other persons
(such as shareholders of the Borrower) in an amount which left the Borrower
insolvent or without sufficient working capital. There are also other events,
such as the failure to perfect a security interest due to faulty documentation
or faulty official filings, which could lead to the invalidation of the
Portfolio's security interest in Corporate Loan or Corporate Debt Security
collateral. If the Portfolio's security interest in Corporate Loan or Corporate
Debt Security collateral is invalidated or the Corporate Loan or Corporate Debt
Security is subordinated to other debt of a Borrower in bankruptcy or other
proceedings, it is unlikely that the Portfolio would be able to recover the full
amount of the principal and interest due on the Corporate Loan or Corporate Debt
Security.

INVESTMENTS IN LOWER QUALITY SECURITIES. The Portfolio may invest all or
substantially all of its assets in Corporate Loans, Corporate Debt Securities or
other securities that are rated below investment grade by Moody's, comparably
rated by another NRSRO, or, if unrated, deemed by the Sub-advisor to be of
equivalent quality. Debt rated Baa by Moody's is considered by Moody's to have
speculative characteristics. Debt rated Ba or B by Moody's is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such lower quality debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Ba and lower are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds," and
involve a high degree of risk. The Sub-advisor does not expect to invest in any
securities rated lower than B3 at the time of investment. In the event of a
downgrade in Corporate Loans or Corporate Debt Securities, the Sub-advisor will
consider whether it will dispose of such Corporate Loan or Corporate Debt
Security.

Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit quality in response to subsequent events, so that an
issuer's

16
<PAGE> 20

current financial condition may be better or worse than a rating indicates. See
"Appendix -- Ratings of Securities" for a full discussion of Moody's ratings.

The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. During an economic downturn or a sustained period of
rising interest rates, issuers of lower quality debt securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing.

PORTFOLIO MANAGEMENT AND OTHER CONSIDERATIONS. In the event of an increase in
short-term rates or other changed market conditions to the point where the
Fund's or the Portfolio's leverage could adversely affect holders of Common
Stock as noted above, or in anticipation of such changes, the Portfolio may
attempt to shorten the average maturity of its investment portfolio, which would
tend to offset the negative impact of leverage on holders of Common Stock.

FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor should be aware that the
Fund, unlike other investment companies that directly acquire and manage their
own portfolios of securities, seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which is a separate
investment company with an identical investment objective (although the Fund may
temporarily hold a de minimis amount of cash). Therefore, the Fund's interest in
the securities owned by the Portfolio is indirect. In addition to selling an
interest to the Fund, the Portfolio may sell interests to other affiliated and
non-affiliated investment companies or institutional investors. Such investors
will invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund due to variations in sales commissions and
other operating expenses. Therefore, investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in other funds that may invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures, including funds that have multiple
classes of shares.

The Board of Directors of the Fund has considered the advantages and
disadvantages of investing the assets of the Fund in the Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Directors believe
that the structure offers opportunities for substantial growth in the assets of
the Portfolio and affords the potential for economies of scale for the Fund.

The Fund may withdraw (redeem) all or any part of its interest in the
Portfolio only pursuant to tender offers by the Portfolio. The Portfolio's Board
of Trustees presently intends each quarter to consider the making of such tender
offers. However, there can be no assurance that the Portfolio's Board of
Trustees will, in fact, decide to undertake the making of such a tender offer.
See "Tender Offers." If the Fund withdraws all of its assets from the Portfolio,
or the Board of Directors of the Fund determines that the investment objective
of the Portfolio is no longer consistent with the investment objective of the
Fund, the Directors would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment advisor to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all of its assets from the Portfolio. Of course, a complete
withdrawal of Fund assets could be accomplished only pursuant to a Portfolio
tender offer.

Smaller investors in the Portfolio may be adversely affected by the actions of
a larger investor in the Portfolio. For example, if a large investor withdraws a
significant amount of assets from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds that have
large or institutional investors.

Funds that invest all their assets in interests in a separate investment
company are a relatively new development in the investment company industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.

Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund stockholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund stockholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio Loans and
noncash assets (as opposed to a cash distribution from the Portfolio). If Loans
and noncash assets are distributed, the Fund could incur brokerage, tax or other
charges in converting them to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments and will adversely affect
the liquidity of the Fund. Notwithstanding the above, there are other means for
meeting stockholder redemption requests, such as borrowing.

17
<PAGE> 21

- --------------------------------------------------------------------------------

PURCHASE OF SHARES

The Fund continuously offers its shares of Common Stock through securities
dealers that have entered into selected dealer agreements with the Distributor.
During any continuous offering of the Fund's Common Stock, shares of the Fund
may be purchased through such selected dealers.

The Fund offers its shares at a price equal to the next determined net asset
value per share without a front-end sales charge. As to purchase orders received
by securities dealers prior to the close of business on the New York Stock
Exchange, Inc. (the "NYSE") (generally, 4:00 p.m., New York time), which
includes orders received after the close of business on the previous day, the
applicable offering price will be based on the net asset value determined as of
15 minutes after the close of business on the NYSE on that day provided the
Distributor in turn receives the order from the securities dealer prior to 30
minutes after the close of business on the NYSE on that day. If the purchase
orders are not received by the Distributor prior to 30 minutes after the close
of business on the NYSE, such orders shall be deemed received on the next
business day. Any order may be rejected by the Distributor or the Fund. The Fund
or the Distributor may suspend the continuous offering of the Fund's shares at
any time in response to conditions in the securities markets or otherwise and
may thereafter resume such offering from time to time. Neither the Distributor
nor the dealers are permitted to withhold placing orders to benefit themselves
by a price change. The Distributor is required to advise the Fund promptly of
all purchase orders and cause payments for shares of Common Stock to be
delivered promptly to the Fund.

Due to the administrative complexities associated with a continuous offering,
administrative errors may result in the Distributor or an affiliate
inadvertently acquiring nominal numbers (in no event in excess of 5% of the
shares of Common Stock) of shares of Common Stock which it may wish to resell.
Such shares of Common Stock will not be subject to any investment restriction
and may be resold pursuant to this Prospectus.

The Distributor compensates selected dealers at a rate of 3.0% of amounts
sold. If the shares remain outstanding after twelve months from the date of
their original purchase, the Distributor will additionally compensate such
dealers quarterly at an annual rate based on a percentage of the value of such
shares sold by such dealers and remaining outstanding, in accordance with the
following schedule:

<TABLE>
<CAPTION>
ANNUAL COMPENSATION AS A
YEAR AFTER DATE PERCENTAGE OF VALUE OF SHARES
OF ORIGINAL PURCHASE OUTSTANDING
-------------------- -----------------------------
<S> <C>
First....................................................... 0.00%
Second...................................................... 0.10%
Third....................................................... 0.15%
Fourth...................................................... 0.20%
Fifth and following......................................... 0.25%
</TABLE>

The compensation paid to selected dealers and the Distributor, including the
compensation paid at the time of purchase, the quarterly payments mentioned
above and the early withdrawal charge, if any, will not in the aggregate exceed
the applicable limit, as determined from time to time by the National
Association of Securities Dealers, Inc. ("NASD").

- --------------------------------------------------------------------------------

TENDER OFFERS

In recognition of the possibility that a secondary market for the Fund's
shares will not exist, the Fund may take actions that will provide liquidity to
stockholders. The Fund may from time to time make Tender Offers, i.e., offers to
repurchase all or a portion of its shares of Common Stock from stockholders at a
price per share equal to the net asset value per share of the Common Stock
determined at the close of business on the day an offer terminates. The Board of
Directors considers each quarter the making of Tender Offers. There can be no
assurance that the Board will decide to undertake a Tender Offer in any
particular quarter. In addition, any partial Tender Offer by the Fund may result
in a proration of the shares repurchased from the Fund's Common Stockholders who
participate in the Tender Offer. Subject to the Fund's investment restriction
with respect to borrowings, the Fund may borrow money to finance the repurchase
of shares pursuant to any Tender Offers. See "Special Considerations and Risk
Factors -- Effects of Leverage" and "Investment Restrictions."

The Fund's assets consist primarily of its interest in the Portfolio.
Therefore, in order to finance the repurchase of Fund shares pursuant to Tender
Offers, the Fund may find it necessary to liquidate all or a portion of its
interest in the Portfolio. Because interests in the Portfolio may not be
transferred, the Fund may withdraw a portion of its interest only pursuant to
tender offers by the Portfolio. The Fund will not conduct a Tender Offer for
Fund shares unless the Portfolio simultaneously conducts a tender offer for
Portfolio interests. The Portfolio's Trustees presently intend each quarter to
consider the making of such tender offers. However, there are no assurances that
the Portfolio's Board of Trustees will, in fact, decide to undertake such a
tender offer. The Fund cannot make a Tender Offer larger than a tender offer
made by the Portfolio. The Portfolio will make tender offers, if any, to all of
its investors, including the

18
<PAGE> 22

Fund, on the same terms, which practice may affect the size of the Portfolio's
offers. Subject to the Portfolio's investment restriction with respect to
borrowings, the Portfolio may borrow money or issue debt obligations to finance
its repurchase obligations pursuant to any such tender offer.

The Fund expects that ordinarily there will be no secondary market for the
Fund's Common Stock and that periodic Tender Offers will be the only source of
liquidity for Fund stockholders. Nevertheless, if a secondary market develops
for the Common Stock of the Fund, the market price of the shares may vary from
net asset value from time to time. Such variance may be affected by, among other
factors, relative demand and supply of shares and the performance of the Fund,
especially as it affects the yield on and net asset value of the Common Stock of
the Fund. A Tender Offer for shares of Common Stock of the Fund at net asset
value is expected to reduce any spread between net asset value and market price
that may otherwise develop. However, there can be no assurance that such action
would result in the Fund's Common Stock trading at a price that equals or
approximates net asset value.

Although the Board of Directors believes that the Tender Offers generally
would be beneficial to holders of the Fund's Common Stock, the acquisition of
shares of Common Stock by the Fund will decrease the total assets of the Fund
and therefore have the likely effect of increasing the Fund's expense ratio
(assuming such acquisition is not offset by the issuance of additional shares of
Common Stock). Furthermore, to the extent the Fund borrows to finance the making
of Tender Offers, interest on such borrowings reduce the Fund's net investment
income.

It is the Board of Directors' announced policy, which may be changed by the
Board, not to repurchase shares pursuant to a Tender Offer if (1) such
repurchases would terminate the Fund's status as a RIC under the Code (which
would make the Fund a taxable entity, causing its income to be taxed at the
corporate level in addition to the taxation of stockholders who receive
dividends from the Fund); (2) the Portfolio would not be able to liquidate
portfolio securities in a manner that is orderly and consistent with the Fund's
investment objective and policies in order to repurchase Common Stock tendered
pursuant to the Tender Offer; or (3) there is, in the Board's judgment, any (a)
legal action or proceeding instituted or threatened challenging the Tender Offer
or otherwise materially adversely affecting the Fund, (b) declaration of a
banking moratorium by federal or state authorities or any suspension of payment
by banks in the United States or New York State, which is material to the Fund,
(c) limitation imposed by federal or state authorities on the extension of
credit by lending institutions, (d) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States which is material to the Fund, or (e) other event or condition
which would have a material adverse effect on the Fund or its stockholders if
shares of Common Stock tendered pursuant to the Tender Offer were purchased.
Thus, there can be no assurance that the Board will proceed with any Tender
Offer. The Board of Directors may modify these conditions in light of
circumstances existing at the time. If the Board of Directors determines to
repurchase the shares of Common Stock pursuant to a Tender Offer, such
repurchases could significantly reduce the asset coverage of any borrowing or
outstanding senior securities. The Fund may not repurchase shares of Common
Stock to the extent such repurchases would result in the asset coverage with
respect to such borrowing or senior securities being reduced below the asset
coverage requirement set forth in the 1940 Act. Accordingly, in order to
repurchase all shares of Common Stock tendered, the Fund may have to repay all
or part of any then outstanding borrowing or redeem all or part of any then
outstanding senior securities to maintain the required asset coverage. See
"Special Considerations and Risk Factors -- Effects of Leverage." In addition,
the amount of shares of Common Stock for which the Fund makes any particular
Tender Offer may be limited for the reasons set forth above or in respect of
other concerns related to liquidity of the Portfolio.

In conducting any Tender Offers, the Fund expects to rely on a rule
promulgated by the Securities and Exchange Commission that requires, among other
things, that there not be a widely available secondary market for the Fund's
Common Stock. In the event that circumstances arise under which the Fund does
not conduct the Tender Offers regularly, the Board of Directors would consider
alternative means of providing liquidity for holders of Common Stock. Such
action would include an evaluation of any secondary market that then existed and
a determination of whether such market provided liquidity for holders of Common
Stock. If the Board of Directors determines that such market, if any, fails to
provide liquidity for the holders of Common Stock, the Board expects that it
will consider all then available alternatives to provide such liquidity. Among
the alternatives that the Board of Directors may consider is the listing of the
Fund's Common Stock on a major domestic stock exchange or on the Nasdaq Stock
Market in order to provide such liquidity. The Board of Directors also may
consider causing the Fund to repurchase its shares from time to time in
open-market or private transactions when it can do so on terms that represent a
favorable investment opportunity. In any event, the Board of Directors expects
that it will cause the Fund to take whatever action it deems necessary or
appropriate to provide liquidity for the holders of Common Stock in light of the
facts and circumstances existing at such time.

To consummate a tender offer for the repurchase of interests in the Portfolio
(which may be necessary for the Fund to complete a Tender Offer), the Portfolio
may be required to liquidate portfolio securities, and realize gains or losses,
at a time when the Sub-advisor would otherwise consider it disadvantageous to do
so.

Each Tender Offer will be made and stockholders notified in accordance with
the requirements of the Securities Exchange Act of 1934 and the 1940 Act, either
by publication or mailing or both. The offering documents will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. The repurchase of tendered shares by the Fund is a
taxable event. See "Taxes." The Fund will pay all costs and expenses associated
with the making of any Tender Offer. An Early Withdrawal Charge will be imposed
on most shares accepted for tender that have been held for less than four years.
See "Early Withdrawal Charge."

19
<PAGE> 23

- --------------------------------------------------------------------------------

EARLY WITHDRAWAL CHARGE

An Early Withdrawal Charge to recover distribution expenses incurred by the
Distributor will be charged against the stockholder's investment account and
paid to the Distributor in connection with most shares of Common Stock held for
less than four years which are accepted by the Fund for repurchase pursuant to a
Tender Offer in the manner described below. The Early Withdrawal Charge will be
imposed on those shares of Common Stock accepted for tender based on an amount
equal to the lesser of the then current net asset value of the shares of Common
Stock or the original purchase price of the shares of Common Stock being
tendered. Accordingly, the Early Withdrawal Charge is not imposed on increases
in the net asset value above the initial purchase price. In addition, the Early
Withdrawal Charge is not imposed on shares derived from reinvestments of
dividends or capital gains distributions. In determining whether an Early
Withdrawal Charge is payable, it is assumed that the acceptance of an offer to
repurchase pursuant to a Tender Offer would be made from the earliest purchase
of shares of Common Stock. The Early Withdrawal Charge imposed will vary
depending on the length of time the Common Stock has been owned since purchase
(separate purchases shall not be aggregated for these purposes), as set forth in
the following table:

<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
------------------ ----------
<S> <C>
First....................................................... 3.0%
Second...................................................... 2.5%
Third....................................................... 2.0%
Fourth...................................................... 1.0%
Fifth and following......................................... 0.0%
</TABLE>

In determining whether an Early Withdrawal Charge is applicable to a tender of
shares of Common Stock, the calculation will be determined in the manner that
results in the lowest possible amount being charged. Therefore, it will be
assumed that the tender is first of shares of Common Stock held for over four
years and shares of Common Stock acquired pursuant to reinvestment of dividends
or distributions and then of shares of Common Stock held longest during the
three-year period. The Early Withdrawal Charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.

EXAMPLE. Assume an investor purchased 1,000 shares of Common Stock (at a cost
of $10,000) and in the second year after purchase, the net asset value per share
is $10.15 and, during such time, the investor has acquired 100 additional shares
of Common Stock upon dividend reinvestment. If at such time the investor makes
his first redemption of 500 shares of Common Stock (proceeds of $5,075), 100
shares will not be subject to the Early Withdrawal Charge because of dividend
reinvestment. With respect to the remaining 400 shares of Common Stock, the
Early Withdrawal Charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $0.15 per share. Therefore, $4,000
of the $5,075 redemption proceeds will be charged at a rate of 2.5% (the
applicable rate in the second year after purchase).

- --------------------------------------------------------------------------------

MANAGEMENT

Each of the Fund's Board of Directors and the Portfolio's Board of Trustees
has overall responsibility for the operation of the Fund and the Portfolio,
respectively. Pursuant to such responsibility, each Board has approved contracts
with various financial organizations to provide, among other things, day-to-day
management services required by the Fund and the Portfolio.

INVESTMENT MANAGEMENT

The Investment Management and Administration Contract provides that, subject
to the direction of the Board of Trustees of the Portfolio, AIM is responsible
for the management and administration of the Portfolio. Pursuant to the
Sub-Advisory and Sub-Administration Contract, AIM has delegated its
responsibility for the management and administration of the Portfolio to the
Sub-advisor. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Sub-advisor, subject to review by the Board
of Trustees of the Portfolio and AIM.

In providing investment management for the Portfolio, the Sub-advisor will
consider analyses from various sources, make the necessary investment decisions,
and place orders for transactions accordingly. The Portfolio pays AIM a monthly
fee at an annual rate of 0.95% of the Portfolio's average daily net assets
(i.e., the average daily value of the total assets of the Portfolio, minus the
sum of accrued liabilities of the Portfolio). AIM pays the Sub-advisor a monthly
fee at an annual rate of 0.48% of the Portfolio's average daily net assets. For
purposes of these calculations, average daily net assets is determined at the
end of each month on the basis of the average net assets of the Portfolio for
each day during the month.

20
<PAGE> 24

The investment professional primarily responsible for the day-to-day
management of the Portfolio is as follows:

<TABLE>
<CAPTION>
NAME TITLE BUSINESS EXPERIENCE
---- ----- -------------------
<S> <C> <C>
Anthony R. Clemente...... Portfolio Manager Portfolio Manager since February, 1998. For the
preceding five years, Mr. Clemente was a Vice
President in the Fixed Income Department of
Merrill Lynch Asset Management L.P. and
assisted in the portfolio management of Merrill
Lynch Senior Floating Rate Fund, Inc. and
Merrill Lynch Prime Rate Portfolio.
</TABLE>

Pursuant to the Sub-Sub-Advisory and Sub-Sub-Administration Agreement between
the Sub-advisor and INVESCO (NY), the latter acts as the investment
sub-sub-advisor and sub-sub-administrator of the Portfolio. INVESCO (NY),
located at 50 California Street, San Francisco, CA 94111 and 1166 Avenue of the
Americas, New York, NY 10036, is the investment sub-sub-advisor with respect to
certain of the Portfolio's assets, as determined by the Sub-advisor (the
"Sub-Sub-Advised Assets"). The Sub-Sub-Advised Assets consist of the Portfolio's
cash and cash equivalents and short-term investment grade debt obligations, but
may also include other asset classes. With respect to the Sub-Sub-Advised
Assets, INVESCO (NY) has responsibility for making decisions to buy, sell or
hold a particular security, subject to review by the Board of Trustees of the
Portfolio and AIM. In providing investment sub-sub-advisory services for the
Portfolio, INVESCO (NY) will consider analyses from various sources, make the
necessary investment decisions, and place orders for transactions accordingly.
INVESCO (NY) will also provide all administrative services to the Portfolio,
including assistance in the preparation of filings with the SEC and other
regulatory bodies and supervision of custodial, accounting and other services by
third party service providers. The Sub-advisor (and not the Fund or the
Portfolio) pays INVESCO (NY) a monthly fee for investment sub-sub-advisory and
sub-sub-administration services at the annual rate of 0.48% of the Portfolio's
average daily net assets delegated to it.

Parag Saxena will provide day-to-day management of the Sub-Sub-Advised Assets
of the Portfolio. Mr. Saxena has been a Managing Director of INVESCO (NY) (and
its predecessor, Chancellor Capital Management, Inc.) for the past five years.

The Sub-advisor is a subsidiary of AMVESCAP PLC. As of April 30, 1998, the
Sub-advisor had assets under management totaling approximately $3.1 billion and
the Sub-advisor ranked as the largest institutional investment manager of the
senior secured asset class. INVESCO (NY) is also a subsidiary of AMVESCAP PLC.
The U.S. offices of the Sub-advisor and INVESCO (NY) are located at 1166 Avenue
of the Americas, New York, New York 10036, and 50 California Street, 27th Floor,
San Francisco, California 94111.

On May 29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect
parent organization of the Sub-advisor, consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included the Sub-advisor, INVESCO (NY) and certain other
affiliates. As a result of this transaction, the Sub-advisor and INVESCO (NY)
each is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the
sale, the Sub-advisor and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.

AIM, the Sub-advisor and INVESCO (NY) and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM, the
Sub-advisor and INVESCO (NY) are each indirect wholly owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.

In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM, the Sub-advisor and INVESCO (NY) draw upon the expertise,
personnel, data and systems of other offices, including investment offices in
Atlanta, Boston, Dallas, Denver, Louisville, Miami, Portland (Oregon),
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the Fund, the Sub-advisor employs a team approach, taking advantage of its
investment resources around the world.

The Administration Agreement provides that, subject to the direction of the
Board of Directors of the Fund, AIM will perform certain administrative services
for the Fund. AIM has delegated these administrative duties to INVESCO (NY)
pursuant to the Sub-Administration Agreement. INVESCO (NY) will furnish
corporate officers and clerical staff, provide office space, services and
equipment, prepare or assist in the preparation of reports and proxy materials
to stockholders and filings with the SEC and other regulatory bodies, and
supervise the provision of custodial, accounting and other services by third
party service providers. The Fund pays administration fees at the annualized
rate of 0.25% of its average daily net assets.

Unless earlier terminated as described below, the Portfolio's Investment
Management and Administration Contract, the Portfolio's Sub-Advisory and
Sub-Administration Agreement, the Portfolio's Sub-Sub-Advisory and
Sub-Sub-Administration Agreement, the Fund's Administration Agreement, and the
Fund's Sub-Administration Agreement will remain in effect for two years from the
date of this Prospectus and from year to year thereafter if approved annually
(a) by the Board of Directors/Trustees of the Fund and the Portfolio or by a
majority of the outstanding shares of the Fund and the Portfolio, and (b) by a
majority of the Directors/Trustees who are not parties to such contract or
interested persons (as defined in the 1940 Act) of any such party. Such
contracts are not assignable and may be terminated without penalty on 60 days'
written notice at the option of either party thereto or by the vote of the
stockholders of the Fund.

21
<PAGE> 25

INVESCO (NY) also serves as the Fund's and the Portfolio's pricing and
accounting agent. Each of the Fund and the Portfolio pays a monthly fee to
INVESCO (NY) for these services at the annualized rate, respectively, of .02%
and .01% of their average daily net assets.

- --------------------------------------------------------------------------------

DIRECTORS AND EXECUTIVE OFFICERS

The Directors and executive officers of the Fund, their ages and their
principal occupations during the last five years are set forth below. Unless
otherwise indicated, the address of each Executive Officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.

<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH PRINCIPAL OCCUPATIONS AND BUSINESS
THE FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
----------------------- ----------------------------------
<S> <C>
William J. Guilfoyle*, 40 President, GT Global, Inc. ("GT Global") since 1995;
Director, Chairman of the Board Director, GT Global since 1991; Senior Vice President and
and President Director of Sales and Marketing, GT Global from May 1992 to
50 California Street April 1995; Director, Liechtenstein Global Trust AG (holding
San Francisco, CA 94111 company of the various international LGT companies) Advisory
Board from January 1996 to May 1998; Director, G.T. Global
Insurance Agency ("G.T. Insurance") since 1996; President
and Chief Executive Officer, G.T. Insurance since 1995;
Senior Vice President and Director, Sales and Marketing,
G.T. Insurance from April 1995 to November 1995; Senior Vice
President, Retail Marketing, G.T. Insurance from 1992 to
1993; and Trustee, each of the other investment companies
registered under the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.

C. Derek Anderson, 57 President, Plantagenet Capital Management, LLC (an
Director investment partnership); Chief Executive Officer,
220 Sansome Street Plantagenet Holdings, Ltd. (an investment banking firm);
Suite 400 Director, Anderson Capital Management, Inc. since 1988;
San Francisco, CA 94104 Director, PremiumWear, Inc. (formerly Munsingwear, Inc.)(a
casual apparel company) and Director, "R" Homes, Inc. and
various other companies; and Trustee, each of the other
investment companies registered under the 1940 Act, that is
sub-advised or sub-administered by the Sub-advisor.

Frank S. Bayley, 58 Partner, law firm of Baker & McKenzie; Director and
Director Chairman, C.D. Stimson Company (a private investment
Two Embarcadero Center company); and Trustee, each of the other investment
Suite 2400 companies registered under the 1940 Act that is sub-advised
San Francisco, CA 94111 or sub-administered by the Sub-advisor.

Arthur C. Patterson, 54 Managing Partner, Accel Partners (a venture capital firm);
Director Director, Viasoft and PageMart, Inc. (both public software
428 University Avenue companies) and several other privately held software
Palo Alto, CA 94301 communications companies; and Trustee, each of the other
investment companies registered under the 1940 Act that is
sub-advised or sub-administered by the Sub-advisor.

Ruth H. Quigley, 63 Private investor; President, Quigley Friedlander & Co., Inc.
Director (a financial advisory services firm) from 1984 to 1986; and
1055 California Street Trustee, each of the other investment companies registered
San Francisco, CA 94108 under the 1940 Act that is sub-advised or sub-administered
by the Sub-advisor.

John J. Arthur+, 53 Director, Senior Vice President and Treasurer, A I M
Vice President Advisors, Inc.; Vice President and Treasurer, A I M
Management Group Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.

Kenneth W. Chancey, 53 Senior Vice President -- Mutual Fund Accounting, INVESCO
Vice President and Principal (NY) since 1997; Vice President -- Mutual Fund Accounting,
Accounting Officer INVESCO (NY) from 1992-1997.
50 California Street
San Francisco, CA 94111

Melville B. Cox, 54 Vice President and Chief Compliance Officer, A I M Advisors,
Vice President Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.
</TABLE>

- ---------------

* Mr. Guilfoyle is an "interested person" of the Fund as defined by the 1940 Act
due to his affiliation with INVESCO (NY) and its affiliates.

+ Mr. Arthur and Ms. Relihan are married to each other.

22
<PAGE> 26

<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH PRINCIPAL OCCUPATIONS AND BUSINESS
THE FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
----------------------- ----------------------------------
<S> <C>
Gary T. Crum, 50 Director and President, A I M Capital Management, Inc.;
Vice President Director and Senior Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.

Robert H. Graham, 51 Director, President and Chief Executive Officer, A I M
Vice President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; Director,
AMVESCAP PLC.

Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, INVESCO
Vice President and Secretary (NY) from October 1997 until May 29, 1998; Secretary and
50 California Street Chief Legal and Compliance Officer, INVESCO (NY) Asset
San Francisco, CA 94111 Management, Inc., INVESCO (NY), GT Global Investor Services,
Inc. and G.T. Insurance since August 1997; Secretary and
Chief Legal and Compliance Officer, GT Global from August
1997 to April 1998; Executive Vice President of the Asset
Management Division of Liechtenstein Global Trust AG, from
October 1996 to May 1998; Senior Vice President, General
Counsel and Secretary of INVESCO (NY) Asset Management,
Inc., INVESCO (NY), GT Global, GT Global Investor Services,
Inc. and G.T. Insurance from May 1994 to October 1996; and
Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of
the Strong Funds from October 1991 to May 1994.

Carol F. Relihan+, 43 Director, Senior Vice President, General Counsel and
Vice President Secretary, A I M Advisors, Inc.; Vice President, General
Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President, General Counsel, Fund Management
Company; Vice President and General Counsel, A I M Fund
Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.

Dana R. Sutton, 39 Vice President and Fund Controller, A I M Advisors, Inc.;
Vice President and Assistant and Assistant Vice President and Assistant Treasurer, Fund
Treasurer Management Company.
</TABLE>

- ---------------

+ Mr. Arthur and Ms. Relihan are married to each other.

The Board of Directors of the Fund has an Audit Committee, comprised of Miss
Quigley, and Messrs. Anderson, Bayley and Patterson, which is responsible for
reviewing and evaluating the audit function, including recommending firms to
serve as independent auditors of the Fund. Each of the officers of the Fund is
also an officer of each of the other investment companies registered under the
1940 Act that is sub-advised or sub-administered by INVESCO (NY). The Fund pays
each Director who is not a director, officer or employee of the Sub-advisor or
any affiliated company $5,000 a year, plus $300 for each meeting of the Board
attended by the Director, and reimburses travel and other expenses incurred in
connection with attending Board meetings. Other Directors and officers receive
no compensation or expense reimbursement from the Fund. As of May 1, 1998, the
Directors and officers and their families as a group owned less than 1% of the
outstanding shares of the Fund. The Fund requires no employees since the
Sub-advisor and other third-party service providers perform substantially all of
the services necessary for the Fund's operations.

- --------------------------------------------------------------------------------

PORTFOLIO TRANSACTIONS

Subject to policies established by the Portfolio's Board of Trustees, the
Sub-advisor is responsible for the execution of the Portfolio's transactions and
the selection of brokers and dealers who execute such transactions on behalf of
the Fund. In executing transactions for the Portfolio, the Sub-advisor seeks the
best net results for the Portfolio, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. Although the Sub-advisor generally seeks reasonable competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. The Portfolio has no
obligation to deal with any broker or dealer or group of brokers in the
execution of portfolio transactions.

Consistent with the interests of the Portfolio, the Sub-advisor may select
brokers to execute the Portfolio's portfolio transactions on the basis of the
research and brokerage services they provide to the Sub-advisor for its use in
managing the Portfolio and its other advisory accounts. Such services may
include furnishing analyses, reports and information concerning issuers,
industries, securities, geographic regions, economic factors and trends,
portfolio strategy, and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). Research and brokerage services received from such brokers are in
addition to, and not in lieu of, the services required to be performed by the
Sub-advisor under the Sub-Advisory and

23
<PAGE> 27

Sub-Administration Contract (defined above). A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Sub-advisor determines in good
faith that such commission is reasonable in terms either of that particular
transaction or the overall responsibility of the Sub-advisor to the Portfolio
and its other clients and that the total commissions paid by the Portfolio will
be reasonable in relation to the benefits received by the Portfolio over the
long term.

Investment decisions for the Portfolio and for other investment accounts
managed or sub-advised by the Sub-advisor are made independently of each other
in light of differing conditions. However, the same investment decision
occasionally may be made for two or more of such accounts including the
Portfolio. In such cases, purchases or sales are allocated as to price or amount
in a manner deemed fair and equitable to all accounts involved. While in some
cases this practice could have a detrimental effect upon the price or value of
the security as far as the Portfolio is concerned, in other cases the
Sub-advisor believes that coordination and the ability to participate in volume
transactions will be beneficial to the Portfolio.

The Portfolio contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through affiliates of
AIM or the Sub-advisor. The Portfolio's Board of Trustees has adopted procedures
in conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context of
the market in which they are operating. Any such transactions will be effected
and related compensation paid only in accordance with applicable SEC
regulations.

The Portfolio engages in trading when the Sub-advisor has concluded that the
sale of a security owned by the Portfolio and/or the purchase of another
security can enhance principal and/or increase income. A security may be sold to
avoid any prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Portfolio's investment
objective, a security also may be sold and a comparable security purchased
coincidentally in order to take advantage of what is believed to be a disparity
in the normal yield and price relationship between the two securities.

The Portfolio's portfolio turnover rate is not expected to exceed 100%, but
may vary greatly from year to year and will not be a limiting factor when the
Sub-advisor deems portfolio changes appropriate. Although the Portfolio
generally does not intend to trade for short-term profits, the securities held
by the Portfolio will be sold whenever the Sub-advisor believes it is
appropriate to do so, without regard to the length of time a particular security
may have been held. A 100% portfolio turnover rate would occur if the lesser of
the value of purchases or sales of the Portfolio's securities for a year
(excluding purchases of U.S. Treasury and other securities with a maturity at
the date of purchase of one year or less) were equal to 100% of the average
monthly value of the securities, excluding short-term investments, held by the
Portfolio during such year. Higher portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs that the Portfolio
will bear directly.

- --------------------------------------------------------------------------------

DIVIDENDS AND OTHER DISTRIBUTIONS

The Fund distributes substantially all of its net investment income, which
consists generally of its share of the Portfolio's net investment income,
reduced by interest on the Fund's borrowings and dividends or interest on its
senior securities, if any. Dividends from the Fund's net investment income are
declared daily and paid monthly to holders of Common Stock. Substantially all of
the Fund's share of the Portfolio's net realized capital gains, if any, are
distributed at least annually to Common Stockholders. Shares of Common Stock
accrue dividends as long as they are outstanding (i.e., from the settlement date
of a purchase order to the settlement date of a Tender Offer).

Under the 1940 Act, the Fund is not permitted to incur indebtedness unless
immediately after such incurrence it has an asset coverage of at least 300% of
the aggregate outstanding principal balance of the indebtedness. Additionally,
under the 1940 Act, the Fund may not declare any dividend or other distribution
on any class of its capital stock or purchase any such capital stock unless it
has, at the time of the declaration of any such distribution or at the time of
any such purchase, asset coverage of at least 300% of the aggregate indebtedness
after deducting the amount of such distribution, or purchase price, as the case
may be. This latter limitation -- and a limitation on the Fund's ability to
declare any cash dividends or other distributions on the Common Stock while any
shares of preferred stock are outstanding -- could under certain circumstances
impair its ability to maintain its qualification for taxation as a RIC. See
"Special Considerations and Risk Factors -- Effects of Leverage" and "Taxes."

Dividends and other distributions to Common Stockholders may be automatically
reinvested in shares of Common Stock pursuant to the Fund's Dividend
Reinvestment Plan. See "Dividend Reinvestment Plan." Dividends and other
distributions will be taxable to stockholders whether they are so reinvested in
shares of the Fund or received in cash. See "Taxes."

- --------------------------------------------------------------------------------

TAXES

TAXATION OF THE FUND

The Fund intends to continue to qualify for the special tax treatment afforded
RICs under Subchapter M of the Code. To qualify for that treatment, the Fund
must distribute to its stockholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gains, and net gains from certain foreign
currency trans-

24
<PAGE> 28

actions) and must meet several additional requirements. Among these requirements
are the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing in
securities or those currencies; and (2) at the close of each quarter of the
Fund's taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, and other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not represent
more than 10% of the issuer's voting securities, and (ii) not more than 25% of
the value of its total assets may be invested in securities (other than U.S.
Government securities) of any one issuer.

The Fund, as an investor in the Portfolio, is deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies the
requirements described above to qualify as a RIC. In each taxable year that it
so qualifies, the Fund (but not its stockholders) will not be subject to federal
income tax on that part of its investment company taxable income and net capital
gain (the excess of net long-term capital gain over net short-term capital
loss), that it distributes to its stockholders.

The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year 98% of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.

See the next section for a discussion of the tax consequences to the Fund of
certain transactions engaged in by the Portfolio.

TAXATION OF THE PORTFOLIO

The Portfolio is treated as a partnership for federal income tax purposes and
is not a "publicly traded partnership." As a result, the Portfolio is not
subject to federal income tax; instead, the Fund, as an investor in the
Portfolio, is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses, deductions,
and credits, without regard to whether it has received any cash distributions
from the Portfolio. The Portfolio also is not subject to state income or
franchise tax.

Because, as noted above, the Fund is deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the Fund satisfies the requirements
to qualify as a RIC, the Portfolio intends to conduct its operations so that the
Fund will be able to satisfy those requirements.

Distributions to the Fund from the Portfolio (whether pursuant to a partial or
complete withdrawal in connection with a tender offer by the Portfolio or
otherwise) will not result in the Fund's recognition of any gain or loss for
federal income tax purposes, except that (1) gain will be recognized to the
extent any cash that is distributed exceeds the Fund's basis for its interest in
the Portfolio before the distribution, (2) income or gain will be recognized if
the distribution is in liquidation of the Fund's entire interest in the
Portfolio and includes a disproportionate share of any unrealized receivables
held by the Portfolio, and (3) loss will be recognized if a liquidation
distribution consists solely of cash and/or unrealized receivables. The Fund's
basis for its interest in the Portfolio generally will equal the amount of cash
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.

Interest received by the Portfolio, and gains realized thereby may be subject
to income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield and/or total return on its securities.
Tax conventions between certain countries and the United States may reduce or
eliminate these taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, (2) on the
disposition of a debt security denominated in a foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Portfolio accrues interest or other receivables or expenses or other
liabilities denominated in a foreign currency and the time it actually collects
the receivables or pays the liabilities, generally are treated as ordinary
income or loss. These gains or losses, referred to under the Code as "section
988" gains or losses, may increase or decrease the amount of investment company
taxable income available to the Fund for distribution to its stockholders.

The federal income tax rules governing the taxation of interest rate swaps are
not entirely clear and may require the Portfolio to treat payments received
under such arrangements as ordinary income and to amortize payments under
certain circumstances. The Portfolio will limit its activity in this regard in
order to enable the Fund to maintain its qualification as a RIC.

TAXATION OF THE STOCKHOLDERS

Dividends paid by the Fund from its investment company taxable income, whether
received in cash or reinvested in Fund shares pursuant to the Plan, are taxable
to its stockholders as ordinary income to the extent of its earnings and
profits. (Any distributions in excess of the Fund's earnings and profits first
will reduce the adjusted tax basis of a holder's Common Stock and, after that
basis is reduced to zero, will constitute capital gains to the stockholder,
assuming the Common Stock is held as a capital asset.) Distributions,

25
<PAGE> 29

if any, from the Fund's net capital gain, when designated as such, are taxable
to its stockholders as long-term capital gains, regardless of the length of time
they have owned their Fund shares and whether received by them in cash or
reinvested in Fund shares pursuant to the Plan. Under the Taxpayer Relief Act of
1997 ("Act"), different maximum tax rates apply to a noncorporate taxpayer's net
capital gain distribution from 1997 gains depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. Under the IRS
Restructuring and Reform Act of 1998, a noncorporate taxpayer's net capital gain
from 1998 gains are taxed at a minimum rate of 20% (10% for taxpayers in the 15%
marginal tax bracket). The Fund may divide each net capital gain distribution
into a 28% rate gain distribution and a 20% rate gain distribution (in
accordance with its holding periods for the securities it sold that generated
the distributed gain), in which event its stockholders must treat those portions
accordingly.

Following the end of each calendar year, the Fund notifies its stockholders of
the amounts of any dividends and capital gain distributions paid (or deemed
paid) by the Fund during that year. The information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.

If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Distributions
by the Fund generally will not be eligible for the dividends-received deduction
allowed to corporations. Dividends and other distributions declared by the Fund
in, and payable to stockholders of record as of a date in, October, November, or
December of any year will be deemed to have been paid by the Fund and received
by the stockholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to stockholders for the year in which that December 31 falls.

The Fund must withhold 31% from dividends, capital gain distributions, and
proceeds from sales of Common Stock pursuant to a Tender Offer, if any, payable
to any individuals and certain other noncorporate stockholders who have not
furnished to the Fund a correct taxpayer identification number ("TIN") or a
properly completed claim for exemption on Form W-8 or W-9 ("backup
withholding"). Withholding at that rate also is required from dividends and
capital gain distributions payable to such stockholders who otherwise are
subject to backup withholding. When establishing an account, an investor must
certify under penalty of perjury that the investor's TIN is correct and that the
investor is not otherwise subject to backup withholding.

A loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the reinvestment of
distributions under the Plan or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

Dividends paid by the Fund to a stockholder who, as to the United States, is a
nonresident alien individual or nonresident alien fiduciary of a trust or
estate, foreign corporation, or foreign partnership ("foreign stockholder") will
be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic stockholders will apply. Distributions of net capital gain generally
are not subject to that withholding tax, except in the case of a foreign
stockholder who is a nonresident alien individual physically present in the
United States for more than 182 days during the taxable year and with respect to
whom the distributions are "effectively connected." Foreign stockholders are
urged to consult their own tax advisers concerning the applicability of this
withholding tax.

TENDER OFFERS

A holder of Common Stock who, pursuant to any Tender Offer, tenders all shares
of Common Stock owned by such stockholder and any shares considered owned
thereby under attribution rules contained in the Code will realize a taxable
gain or loss depending upon such stockholder's basis for the shares. Such gain
or loss will be treated as capital gain or loss if the shares are held as
capital assets and will be long-term or short-term depending on the
stockholder's holding period for the shares; capital gain on shares held by a
noncorporate stockholder for more than one year will be subject to federal
income tax at the rates indicated above.

Different tax consequences may apply to tendering and non-tendering holders of
Common Stock in connection with a Tender Offer, and these consequences will be
disclosed in the related offering documents. For example, if a tendering holder
of Common Stock tenders less than all shares owned by or attributed to such
stockholder, and if the payment to such stockholder does not otherwise qualify
as a sale or exchange, the proceeds received will be treated as a taxable
dividend, a return of capital, or capital gain depending on the Fund's earnings
and profits and the stockholder's basis for the tendered shares. Also, there is
a risk that non-tendering holders of Common Stock may be considered to have
received a deemed distribution that may be a taxable dividend in whole or in
part. Holders of Common Stock may wish to consult their tax advisers prior to
tendering.

* * * * *

The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its stockholders. For further information,
reference should be made to the pertinent Code sections and the regulations
promulgated thereunder, which are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Investors are urged
to con-

26
<PAGE> 30

sult their tax advisers regarding specific questions as to federal, state,
local, or foreign taxes. Foreign investors should consider applicable foreign
taxes in their evaluation of an investment in the Fund.

- --------------------------------------------------------------------------------

DIVIDEND REINVESTMENT PLAN

Pursuant to the Plan, each stockholder will be deemed to have elected to have
all dividends and other distributions, net of any applicable withholding taxes,
automatically reinvested in additional shares of Common Stock, newly issued by
the Fund, unless A I M Fund Services, Inc., the Fund's transfer agent, as the
Plan Agent (the "Plan Agent"), is otherwise instructed by the stockholder in
writing. Such dividends and other distributions will be reinvested in shares of
Common Stock at the net asset value per share next determined on the payable
date of such dividend or other distribution. Each stockholder may also elect to
have all dividends and/or other distributions automatically reinvested in Class
B shares of those mutual funds distributed by AIM Distributors (collectively,
the "AIM Funds"). The prospectus of each AIM Fund describes its investment
objectives and policies. Shareholders can obtain without charge, a prospectus by
calling (800)347-4246 and should consider these objectives and policies before
requesting this option.

Automatic reinvestment in shares of a AIM Fund are made at net asset value
without imposition of a sales charge. Reinvestments in a AIM Fund may only be
directed to an account with the identical shareholder registration and account
number. These elections may be changed by a shareholder at any time; to be
effective with respect to a distribution, the shareholder or the shareholder's
broker must contact the Plan Agent by mail or telephone at least 15 business
days prior to the payment date.

Stockholders who do not participate in the Plan will receive all dividends and
other distributions in cash, net of any applicable withholding taxes, paid in
U.S. dollars by check mailed directly to the stockholder by A I M Fund Services,
Inc., as dividend-paying agent. Stockholders who do not wish to have dividends
and other distributions automatically reinvested should notify the Plan Agent at
P.O. Box 4739, Houston, TX 77210-4739. Dividends and other distributions with
respect to shares of Common Stock registered in the name of a broker-dealer or
other nominee (i.e., in "street name") will be reinvested under the Plan unless
such service is not provided by the broker-dealer or nominee or the stockholder
elects to receive dividends and other distributions in cash. A stockholder whose
shares of Common Stock are held by a broker-dealer or nominee that does not
provide a dividend reinvestment service may be required to have his shares of
Common Stock registered in his own name to participate in the Plan. Similarly, a
stockholder may be unable to transfer his account to certain broker-dealers and
continue to participate in the Plan. Investors who own shares of Common Stock
registered in street name should contact the broker or nominee for details
concerning participation in the Plan.

The Plan Agent will maintain all participant accounts in the Plan and furnish
written confirmations of all transactions in the accounts, including information
needed by participants for personal and tax records. Shares of Common Stock in
the account of each participant may be held by the Plan Agent in
non-certificated form in the name of the Plan Agent or the Plan Agent's nominee,
and each stockholder's proxy will include those shares of Common Stock purchased
pursuant to the Plan. Participants in the Plan may withdraw from the Plan upon
written notice to the Plan Agent.

In the case of a stockholder of record, such as a bank, broker-dealer or
nominee, that holds shares of Common Stock for others who are the beneficial
owners, the Plan Agent will administer the Plan on the basis of the number of
shares of Common Stock certified from time to time by the record stockholder as
representing the total amount registered in the stockholder's name and held for
the account of beneficial owners who participate in the Plan.

There will be no charge to participants for reinvesting dividends or other
distributions. The Plan Agent's fees for the handling of reinvestment of
distributions will be paid by the Fund.

All registered holders of shares of Common Stock (other than brokers and
nominees) will be mailed information regarding the Plan, including a form with
which they may elect to terminate participation in the Plan and receive further
dividends and other distributions in cash. An election to terminate
participation in the Plan must be made in writing to the Plan Agent and should
include the stockholder's name and address as they appear on the share
certificate. An election to terminate, until such election is changed, will be
deemed to be an election by a stockholder to take all subsequent distributions
in cash. An election will be effective only for distributions declared and
having a record date at least ten days after the date on which the election is
received.

The receipt of dividends and other distributions in shares of Common Stock
under the Plan will not relieve participants of any income tax (including
withholding taxes) that may be payable on such distributions. See "Taxes."

Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any dividend or other distribution paid subsequent to notice of
the termination sent to the participants in the Plan at least 30 days before the
record date for the distribution. The Plan also may be amended by the Fund or
the Plan Agent, but (except when necessary or appropriate to comply with
applicable law, rules or policies of a regulatory authority) only by at least 30
days' written notice to participants in the Plan. All correspondence concerning
the Plan should be directed to the Plan Agent, P.O. Box 4739 Houston, TX
77210-4739.

27
<PAGE> 31

- --------------------------------------------------------------------------------

AUTOMATIC INVESTMENT PLAN

Investors may purchase shares of the Fund's Common Stock through the Automatic
Investment Plan. Under this Plan, an amount specified by the stockholder of $50
or more (or $25 for Individual Retirement Accounts, Code Section 403(b)(7)
custodial accounts and other tax-qualified employer-sponsored retirement
accounts) on a monthly or quarterly basis will be sent to A I M Fund Services,
Inc. from the investor's bank for investment in the Fund. Participants in the
Automatic Investment Plan should not elect to receive dividends or other
distributions from the Fund in cash. Investors should contact their brokers or
A I M Fund Services, Inc. for more information.

- --------------------------------------------------------------------------------

EXCHANGE PRIVILEGE

The Fund may make available to stockholders who tender shares of the Fund's
Common Stock pursuant to a Tender Offer the privilege of exchanging Fund shares
at net asset value for Class B shares of AIM Funds that are subject to a
contingent deferred sales charge. Any such exchange must be effected in
connection with a stockholder's tender of Fund shares in a Tender Offer. No
Early Withdrawal Charge will be imposed on stockholders choosing to exchange
their Fund shares for shares of any such AIM Fund; however, the exchanging
stockholders will be subject to a contingent deferred sales charge on any such
AIM Fund equivalent to the Early Withdrawal Charge on Common Stock of the Fund.
Thus, shares of such AIM Fund may be subject to a contingent deferred sales
charge upon a subsequent redemption from the AIM Fund. The purchase of shares of
such AIM Fund will be deemed to have occurred at the time of the initial
purchase of the Fund's Common Stock. Holders of Class B AIM Fund shares will not
be permitted to exchange those shares for shares of the Fund's Common Stock.

The prospectus for each AIM Fund describes its investment objectives and
policies. Shareholders can obtain, without charge, a prospectus by calling (800)
347-4246 and should consider these objectives and policies carefully before
requesting an exchange. Each exchange must involve proceeds from Common Stock of
the Fund that have a net asset value of at least $500. An exchange is a taxable
event and may result in a taxable gain or loss. See "Taxes -- Tender Offers."

- --------------------------------------------------------------------------------

DETERMINATION OF NET ASSET VALUE

The net asset value per share of Common Stock is determined Monday through
Friday as of 15 minutes after the close of regular trading on the NYSE
(generally, 4:00 p.m., New York time), on each day during which the NYSE is
open. The NYSE is not open on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. For purposes of determining the net asset
value of a share of Common Stock, the Fund's uninvested assets plus its share of
the value of the securities and any cash or other assets (including interest
accumulated but not yet received) held by the Portfolio minus all liabilities
(including accrued expenses) of the Fund and its share of all liabilities
(including accrued expenses) of the Portfolio is divided by the total number of
shares of Common Stock outstanding at such time. Expenses, including the fees
payable to the Sub-advisor, are accrued daily.

The Sub-advisor, subject to guidelines adopted and periodically reviewed by
the Portfolio's Board of Trustees, values the Corporate Loans and Corporate Debt
Securities at fair value, which approximates market value. In valuing a
Corporate Loan or Corporate Debt Security, the Sub-advisor considers, among
other factors, (i) the creditworthiness of the Borrower and any Intermediate
Participants, (ii) the current interest rate, period until next interest rate
reset and maturity of the Corporate Loan or Corporate Debt Security, (iii)
recent prices in the market for instruments of similar quality, rate, period
until next prices in the market for instruments of similar quality, rate, period
until next interest rate reset and maturity. The Sub-advisor believes that
Intermediate Participants selling Corporate Loans or otherwise involved in a
Corporate Loan transaction may tend, in valuing Corporate Loans for their own
accounts, to be less sensitive to interest rate and credit quality changes and,
accordingly, the Sub-advisor may not rely solely on such valuations in valuing
the Corporate Loans for the Fund's account. In addition, because a secondary
trading market in Corporate Loans and Corporate Debt Securities has not yet
fully developed, in valuing Corporate Loans and Corporate Debt Securities, the
Sub-advisor may not rely solely on but may consider prices or quotations
provided by banks, dealers or pricing services with respect to secondary market
transactions in Corporate Loans and Corporate Debt Securities. To the extent
that an active secondary market in Corporate Loans and Corporate Debt Securities
develops to a reliable degree, or exists in respect of other loans or
instruments deemed to be similar to Corporate Loans and Corporate Debt
Securities, the Sub-advisor may rely to an increasing extent on such market
prices and quotations in valuing the Corporate Loans and Corporate Debt
Securities held by the Portfolio.

Other portfolio securities (other than short-term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities are valued at the last sale price on the exchange that is the primary
market for such securities, or the last quoted bid price for those securities
for which the over-the-counter market is the primary market or for listed
securities in which there were no sales during the day. The value of interest
rate swaps, caps and floors is determined in accordance with a formula and then
confirmed periodically by obtaining a bank quotation. Positions in options are
valued at

28
<PAGE> 32

the last sale price on the market where any such option is principally traded.
Obligations with remaining maturities of 60 days or less are valued at amortized
cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities. Securities for
which there exist no price quotations or valuations and all other assets are
valued at fair value as determined in good faith by or on behalf of the Board of
Trustees of the Portfolio.

- --------------------------------------------------------------------------------

DESCRIPTION OF CAPITAL STOCK

The Fund is authorized to issue 1 billion shares of capital stock, $.001 par
value, all of which is classified as Common Stock. Although it has no current
intention of doing so, the Board of Directors of the Fund is authorized to
classify and reclassify any unissued shares of capital stock from time to time
by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or terms and conditions of
redemption of such shares by the Fund. The description of the capital stock and
the description under "Description of Capital Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation" are subject to the provisions
contained in the Fund's Articles of Incorporation and Bylaws.

COMMON STOCK

Shares of the Common Stock have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend, distribution and
liquidation rights. The outstanding shares of Common Stock are, and those
offered hereby, when issued, will be, fully paid and nonassessable. Stockholders
are entitled to one vote per share. All voting rights for the election of
directors are noncumulative, which means that the holders of more than 50% of
the shares can elect 100% of the directors then nominated for election if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any directors.

As of the date of this Prospectus, GT Global, Inc. and its affiliates own
approximately 10% of the Fund's outstanding shares of Common Stock.

Shares of the Common Stock will be held in book-entry form unless physical
certificates are requested in writing by a Common Stockholder.

CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION

The Fund presently has provisions in its Articles of Incorporation that have
the effect of limiting (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain transactions,
and (iii) the ability of the Fund's directors or stockholders to amend the
Articles of Incorporation. These provisions of the Articles of Incorporation may
be regarded as "anti-takeover" provisions. Under Maryland law and the Fund's
Articles of Incorporation, the affirmative vote of the holders of at least a
majority of the votes entitled to be cast is required for the consolidation of
the Fund with another corporation, a merger of the Fund with or into another
corporation (except for certain mergers in which the Fund is the successor), a
statutory share exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the dissolution of
the Fund and any amendment to the Fund's Articles of Incorporation. In addition,
the affirmative vote of the holders of at least 66 2/3% (which is higher than
that required under Maryland law or the 1940 Act) of the outstanding shares of
the Fund's capital stock is required generally to authorize any of the following
transactions or to amend the provisions of the Articles of Incorporation
relating to such transactions:

(i) merger, consolidation or statutory share exchange of the Fund with
or into any other corporation;

(ii) issuance of any securities of the Fund to any person or entity
for cash;

(iii) sale, lease or exchange of all or any substantial part of the
assets of the Fund to any entity or person (except assets having an
aggregate market value of less than $1,000,000); or

(iv) sale, lease or exchange to the Fund, in exchange for securities
of the Fund, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000).

A similar vote also would be required for any amendment of the Articles of
Incorporation to convert the Fund to an open-end investment company by making
any class of the Fund's capital stock a "redeemable security," as that term is
defined in the 1940 Act. Such vote would not be required with respect to any of
the foregoing transactions, however, when, under certain conditions, the Board
of Directors approves the transaction, although in certain cases involving
merger, consolidation or statutory share exchange or sale of all or
substantially all of the Fund's assets or the conversion of the Fund to an
open-end investment company, the affirmative vote of the holders of a majority
of the outstanding shares of the Fund's capital stock would nevertheless be
required. Reference is made to the Articles of Incorporation of the Fund, on
file with the SEC, for the full text of these provisions.

The provisions of the Articles of Incorporation described above and the Fund's
right to make a tender offer for its shares could have the effect of depriving
the stockholders of opportunities to sell their shares at a premium over net
asset value by discouraging a third

29
<PAGE> 33

party from seeking to obtain control of the Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render more difficult
the accomplishment of a merger or the assumption of control. They provide,
however, the advantage of potentially requiring persons seeking control of the
Fund to negotiate with its management regarding the price to be paid and
facilitating the continuity of the Fund's management, investment objectives and
policies. The Board of Directors of the Fund has considered the foregoing
anti-takeover provisions and concluded that they are in the best interest of the
Fund and its stockholders.

- --------------------------------------------------------------------------------

YIELD INFORMATION

From time to time the Fund may include its yield and/or total return for
various specified time periods in advertisements or information furnished to
present or prospective stockholders.

The yield of the Fund refers to the income generated by an investment in the
Fund over a stated period. Yield is calculated by annualizing the most recent
monthly distribution and dividing the product by the average maximum offering
price.

The Fund also may quote annual total return and aggregate total return
performance data. Total return quotations for the specified periods will be
computed by finding the rate of return (based on net investment income and any
capital gains or losses on portfolio investments over such periods) that would
equate the initial amount invested to the redeemable value of such investment at
the end of the period.

The calculation of yield and total return does not reflect the imposition of
any Early Withdrawal Charges or the amount of any stockholder's tax liability.

Yield and total return figures are based on the Fund's historical performance
and are not intended to indicate future performance. The Fund's yield is
expected to fluctuate, and its total return will vary depending on market
conditions, the Corporate Loans, Corporate Debt Securities and other securities
comprising the Portfolio's investments, the Fund's and the Portfolio's operating
expenses and the amount of net realized and unrealized capital gains or losses
during the period.

On occasion, the Fund may compare its yield to (1) LIBOR, quoted daily in The
Wall Street Journal, (2) the Prime Rate, quoted daily in The Wall Street Journal
as the base rate on corporate loans at large U.S. money center commercial banks,
(3) one or more averages compiled by Donoghue's Money Fund Report, a widely
recognized independent publication that monitors the performance of money market
mutual funds, (4) the average yield reported by the Bank Rate Monitor National
Index(TM) for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical areas,
(5) yield data published by Lipper Analytical Services, Inc., or (6) the yield
on an investment in 90-day Treasury bills on a rolling basis, assuming quarterly
compounding. In addition, the Fund may compare the Prime Rate, the Donoghue's
averages and the other yield data described above to each other. As with yield
quotations, yield comparisons should not be considered indicative of the Fund's
yield or relative performance for any future period.

OTHER INFORMATION

- --------------------------------------------------------------------------------

ORGANIZATION OF THE FUND

The Fund is a continuously offered, non-diversified, closed-end management
investment company. The Fund was incorporated under the name "GT Global Floating
Rate Fund, Inc." in the State of Maryland on December 4, 1996 and is authorized
under Maryland law to do business as "AIM Floating Rate Fund." The Fund has
registered under the 1940 Act. The Fund's principal office is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, and its telephone number
is 1-800-347-4246.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT AND REGISTRAR

State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, will serve as custodian of the Fund's assets held in the
United States. A I M Fund Services, Inc. (the "Transfer Agent") will serve as
the Fund's transfer and dividend disbursing agent and registrar.

LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby will
be passed on for the Fund by Kirkpatrick & Lockhart LLP, Washington, D.C.

INDEPENDENT ACCOUNTANTS

The Fund's independent accountants are ,
. will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal and
state income tax returns and consult with the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.

30
<PAGE> 34

YEAR 2000 COMPLIANCE PROJECT

In providing services to the Fund and the Portfolio, A I M Management Group
Inc. ("AIM Management") and its subsidiaries rely on both internal software
systems as well as external software systems provided by third parties (the
"Software"). Many software systems in use today are unable to distinguish
between the year 2000 from the year 1900. This defect if not cured will likely
adversely affect the services that AIM Management, its subsidiaries and other
service providers to the Fund and the Portfolio provide the Fund and its
stockholders.

To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the fourth quarter of
1998. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm Year 2000 compliance
upon installation.

FURTHER INFORMATION

Further information concerning the Common Stock and the Fund may be found in
the Registration Statement, on file with the SEC.

31
<PAGE> 35

APPENDIX A
- --------------------------------------------------------------------------------

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
("MOODY'S") SECURITIES RATINGS

Aaa -- Securities which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa -- Securities which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade securities. They are rated lower than the best securities because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A -- Securities which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Securities which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such securities lack outstanding
investment characteristics and in fact have speculative characteristics as well.

Ba -- Securities which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes securities in this class.

B -- Securities which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa -- Securities which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca -- Securities which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C -- Securities which are rated C are the lowest rated class of securities,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
ranking category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the Company ranks in the lower end of its generic rating
category.

A-1
<PAGE> 36

[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--

Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173

Sub-Advisor
INVESCO Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036

Sub-Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111

Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739

Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

Independent Accountants
[ ]

For more complete information about funds in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please call your
financial consultant and request a free prospectus. Please read the prospectus
carefully before you invest or send money.

<PAGE> 37

AIM FLOATING RATE FUND

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(1) Financial Statements:

Report of Independent Accountants [to be filed]

Statement of Assets and Liabilities [to be filed]

(2) Exhibits:

<TABLE>
<C> <S>
(a) -- Articles of Incorporation [previously filed]
(b) -- Bylaws [previously filed]
(c) -- None
(d) -- Instruments Defining Rights of Shareholders [previously
filed]
(e) -- Dividend Reinvestment Plan [previously filed]
(f) -- None
(g)(1) -- Investment Management and Administration Contract
[previously filed]
(2) -- Sub-Advisory and Sub-Administration Contract [previously
filed]
(3) -- Sub-Sub-Advisor and Sub-Sub-Administration Contract
[previously filed]
(4) -- Administration Contract [previously filed]
(5) -- Sub-Administration Agreement [previously filed]
(h)(1) -- Distribution Agreement [previously filed]
(2) -- Selected Dealer Agreement [previously filed]
(3) -- Bank Agency Agreement [previously filed]
(i) -- None
(j) -- Custodian Agreement [previously filed]
(k)(1) -- Transfer Agency Agreement [to be filed]
(2) -- Fund Accounting and Pricing Agent Agreement [previously
filed]
(l) -- Opinion and Consent of Counsel [previously filed]
(m) -- None
(n) -- Consent of Independent Accountants [to be filed]
(o) -- Audited Financial Statements dated December 31, 1997 [to
be filed]
(p) -- None
(q) -- None
</TABLE>

ITEM 25. MARKETING ARRANGEMENTS

See the Distribution Agreement filed as Exhibit (h)(1) to this Registration
Statement.

C-1
<PAGE> 38

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses to be incurred in connection with
the offering described in this Registration Statement:

<TABLE>
<S> <C>
Securities and Exchange Commission Fees..................... $n/a*
National Association of Securities Dealers, Inc. Fees....... n/a*
Printing and Engraving Expenses............................. n/a*
Legal Fees.................................................. n/a*
Accounting Expenses......................................... n/a*
Blue Sky Filing Fees and Expenses........................... n/a*
Miscellaneous Expenses...................................... n/a*
----
Total............................................. $n/a*
====
</TABLE>

- ---------------

* This registration statement is being filed for the purpose of updating
information herein and no additional shares are being registered or offered
hereby. See the cover page of this registration statement.

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

None.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

<TABLE>
<CAPTION>
NUMBER OF RECORD
SHAREHOLDERS AS
OF
TITLE OF CLASS JULY 24, 1998
-------------- ----------------
<S> <C>
Shares of Common Stock, par value $0.001 per share.......... 6,383
</TABLE>

ITEM 29. INDEMNIFICATION

Article Twelfth of the Fund's Articles of Incorporation, previously filed as
Exhibit 1 to Registration Statement No. 333-17425, and Article IX of the Fund's
Bylaws, previously filed as Exhibit 2 to Registration Statement No. 333-17425,
provide that the Fund shall indemnify its present and past directors, officers,
employees and agents, and persons who are serving or have served at the Fund's
request in similar capacities for other entities to the maximum extent permitted
by applicable law (including Maryland law and the 1940 Act). Section 2-418(b) of
the Maryland General Corporation Law ("Maryland Code") permits the Fund to
indemnify its directors unless it is established that the act or omission of the
director was material to the matter giving rise to the proceeding, and (a) the
act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; or (b) the director actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director had reasonable cause to believe the act or
omission was unlawful. Indemnification may be made against judgments, penalties,
fines, settlements and reasonable expenses incurred by the director in
connection with a proceeding, in accordance with the Maryland Code. Pursuant to
Section 2-418(j)(1) and Section 2-418(j)(2) of the Maryland Code, the Fund is
permitted to indemnify its officers, employees and agents to the same extent as
its directors. The provisions set forth above apply insofar as consistent with
Section 17(h) of the 1940 Act, which prohibits indemnification of any director
or officer of the Fund against any liability to the Fund or its shareholders to
which such director or officer otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Fund, pursuant to the foregoing provisions, or otherwise, the
Fund has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for a director, officer or controlling
person of the Fund in the successful defense of any action, suit or proceeding
or payment pursuant to any insurance policy is asserted against the Fund by such
director, officer or controlling person in connection with the securities being
registered, the Fund will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

See the material under the heading "Management" and the heading "Directors and
Executive Officers" in the Prospectus filed as part of this Registration
Statement. Information as to the Directors and Officers of AIM, the Sub-advisor
and INVESCO (NY) is included in their Forms ADV (File Nos. 801-12313 and
801-10254, respectively), filed with the Commission, which information is
incorporated herein by reference.

C-2
<PAGE> 39

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records of the Fund will be maintained at the office of the
Fund's custodian at 1776 Heritage Drive, North Quincy, Massachusetts 02171,
except that the Fund's corporate records (its articles of incorporation, by-laws
and minutes of the meetings of its Board of Directors and shareholders) will be
maintained at the offices of INVESCO (NY) at 50 California Street, 27th Floor,
San Francisco, California 94111 and/or AIM at 11 Greenway Plaza, Suite 100,
Houston, TX 77046.

ITEM 32. MANAGEMENT SERVICES

None.

ITEM 33. UNDERTAKINGS

(1) Registrant undertakes to suspend the offering of its shares until it
amends its Prospectus if:

(a) subsequent to the effective date of this Registration Statement,
the net asset value per share declines more than 10% from its net asset
value per share as of the effective date of the Registration Statement; or

(b) The net asset value increases to an amount greater than its net
proceeds as stated in the Prospectus.

(2) Registrant hereby undertakes:

(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to the registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the 1933 Act; (ii)
to reflect in the prospectus any facts or events after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(b) that, for the purposes of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial
bona fide offering thereof; and

(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(3) Registrant hereby undertakes that:

(a) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under Rule 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and

(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

C-3
<PAGE> 40

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, and the State of California, on this
31st day of July, 1998.

GT GLOBAL FLOATING RATE FUND, INC.

d/b/a AIM FLOATING RATE FUND

By: /s/ WILLIAM J. GUILFOYLE*
--------------------------------------
William J. Guilfoyle
President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM J. GUILFOYLE* Director, Chairman of the Board of July 31,
- ----------------------------------------------------- Directors and President (Chief 1998
William J. Guilfoyle Executive Officer)

/s/ C. DEREK ANDERSON* Director July 31,
- ----------------------------------------------------- 1998
C. Derek Anderson

/s/ FRANK S. BAYLEY* Director July 31,
- ----------------------------------------------------- 1998
Frank S. Bayley

/s/ ARTHUR C. PATTERSON* Director July 31,
- ----------------------------------------------------- 1998
Arthur C. Patterson

/s/ RUTH H. QUIGLEY* Director July 31,
- ----------------------------------------------------- 1998
Ruth H. Quigley

/s/ ROBERT G. WADE, JR.* Director July 31,
- ----------------------------------------------------- 1998
Robert G. Wade, Jr.

/s/ KENNETH W. CHANCEY Vice President (Principal Accounting July 31,
- ----------------------------------------------------- Officer) 1998
Kenneth W. Chancey

*By: /s/ MICHAEL A. SILVER
- -----------------------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
</TABLE>

<PAGE> 41

SIGNATURES

Floating Rate Portfolio has duly caused this Registration Statement of AIM
Floating Rate Fund to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, and the State of California, on this
31st day of July, 1998.

FLOATING RATE PORTFOLIO

By: /s/ WILLIAM J. GUILFOYLE*
--------------------------------------
William J. Guilfoyle
President

This Registration Statement of AIM Floating Rate Fund has been signed below by
the following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM J. GUILFOYLE* Trustee, Chairman of the Board of July 31,
- ----------------------------------------------------- Trustees and President (Chief 1998
William J. Guilfoyle Executive Officer)

/s/ C. DEREK ANDERSON* Trustee July 31,
- ----------------------------------------------------- 1998
C. Derek Anderson

/s/ FRANK S. BAYLEY* Trustee July 31,
- ----------------------------------------------------- 1998
Frank S. Bayley

/s/ ARTHUR C. PATTERSON* Trustee July 31,
- ----------------------------------------------------- 1998
Arthur C. Patterson

/s/ RUTH H. QUIGLEY* Trustee July 31,
- ----------------------------------------------------- 1998
Ruth H. Quigley

/s/ KENNETH W. CHANCEY Vice President (Principal Accounting July 31,
- ----------------------------------------------------- Officer) 1998
Kenneth W. Chancey

*By: /s/ MICHAEL A. SILVER
- -----------------------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
</TABLE>

<PAGE> 42

AIM FLOATING RATE FUND

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<S> <C> <C>
(a) Articles of Incorporation (previously filed)................
(b) Bylaws (previously filed)...................................
(c) None........................................................
(d) Instruments Defining Rights of Shareholders (previously
filed)......................................................
(e) Dividend Reinvestment Plan (previously filed)...............
(f) None........................................................
(g)(1) Investment Management and Administration Contract
(previously filed)..........................................
(2) Sub-Advisory and Sub-Administration Contract (previously
filed)......................................................
(3) Sub-Sub-Advisory and Sub-Sub-Administration Contract
(previously filed)..........................................
(4) Administration Contract (previously filed)..................
(5) Sub-Administration Agreement (previously filed).............
(h)(1) Distribution Agreement (previously filed)...................
(2) Selected Dealer Agreement (previously filed)................
(3) Bank Agency Agreement (previously filed)....................
(i) None........................................................
(j) Custodian Agreement (previously filed)......................
(k)(1) Transfer Agency Agreement (to be filed).....................
(2) Fund Accounting and Pricing Agent Agreement (previously
filed)......................................................
(l) Opinion and consent of counsel (previously filed)...........
(m) None........................................................
(n) Consent of Independent Accountants (to be filed)............
(o) Audited Financial Statements dated December 31, 1997 (to be
filed)......................................................
(p) None........................................................
(q) None........................................................
</TABLE>